NDLI: Asymmetric Common Value Auctions with Applications to Private Value Auctions with Resale (2007)

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Asymmetric Common Value Auctions with Applications to Private Value Auctions with Resale (2007)

Content Provider	CiteSeerX
Author	Tan, Guofu Cheng, Harrison
Abstract	We study a model of common value auctions in which bidders ’ private information are independently and asymmetrically distributed. We provide two sufficient conditions under which a first-price auction generates higher revenue than a second-price auction (for a selected equilibrium). A necessary condition is given for this revenue-ranking result to hold in general. We illustrate that in a first-price auction, the seller may benefit from the asymmetry of the bidder information, unlike in the case of private value auctions (as in Cantillon 2007). We further establish a strategic equivalence between our model of common value auctions and an independent and private value (IPV) auction model with resale, when the resale mechanism satisfies a sure-trade property and the common value is the sure-trade price. Using this strategic equivalence and the revenue-ranking result for the common value auctions, we provide an alternative proof of the revenue-ranking result of Hafalir and Krishna (2007) in the IPV auctions with resale. The revenue ranking holds when the offer-maker is fixed or is contingent on the auction outcome. We illustrate that the opposite revenue-ranking may arise (i) when one of the distribution functions does not satisfy the regularity property, or (ii) when the resale mechanism involves repeated offers and delay costs, or (iii) when the Coase Conjecture holds as in Gul, Sonnenschein,
File Format	PDF
Publisher Date	2007-01-01
Access Restriction	Open
Subject Keyword	Necessary Condition Auction Outcome First-price Auction Strategic Equivalence Bidder Information Revenue-ranking Result Common Value Auction Alternative Proof Bidder Private Information Delay Cost Resale Mechanism Private Value Distribution Function Regularity Prop-erty Com-mon Value Auction Auction Model Common Value Economic Theory Selected Equilibrium Ipv Auction Sure-trade Price Value Auction Private Value Auction Revenue Rank-ing Opposite Revenue-ranking Asymmetric Common Value Auction Sufficient Condition Coase Conjecture Sure-trade Prop-erty Second-price Auction
Content Type	Text

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