Revealing Information in Auctions: The Optimal Auction Versus the Second-Price Auction

Economic Letters

9 Pages Posted: 15 Jun 2021

See all articles by Alina Arefeva

Alina Arefeva

UW Madison - Wisconsin School Business

Delong Meng

Shanghai Jiao Tong University (SJTU) - Shanghai Jiao Tong University, Antai College of Economics and Management

Date Written: June 11, 2021

Abstract

We study the optimal information disclosure policy in the optimal auction and the second-price auction when the seller has information that additively adjusts the independent private values of the bidders. In this setting, information revelation could change the allocation of the good in both types of auctions. However, in the optimal auction, the change in allocation makes the revenue function convex in the additive adjustments, so the seller should always reveal information. In contrast, in the second-price auction, the change in allocation makes the revenue function non-convex, in which case the seller might benefit from withholding information.

Keywords: information disclosure, auctions, independent private value, convexity

JEL Classification: D44, D82

Suggested Citation

Arefeva, Alina and Meng, Delong, Revealing Information in Auctions: The Optimal Auction Versus the Second-Price Auction (June 11, 2021). Economic Letters, Available at SSRN: https://ssrn.com/abstract=3865161

Alina Arefeva (Contact Author)

UW Madison - Wisconsin School Business ( email )

975 University Avenue
Madison, WI 53706
United States

HOME PAGE: http://www.aarefeva.com

Delong Meng

Shanghai Jiao Tong University (SJTU) - Shanghai Jiao Tong University, Antai College of Economics and Management ( email )

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