Working Paper: CEPR ID: DP11782
Authors: Dirk Bergemann; Benjamin A. Brooks; Stephen Morris
Abstract: We explore the impact of private information in sealed-bid first-price auctions. For a given symmetric and arbitrarily correlated prior distribution over values, we characterize the lowest winning-bid distribution that can arise across all information structures and equilibria. The information and equilibrium attaining this minimum leave bidders indifferent between their equilibrium bids and all higher bids. Our results provide lower bounds for bids and revenue with asymmetric distributions over values. We also report further characterizations of revenue and bidder surplus including upper bounds on revenue. Our work has implications for the identification of value distributions from data on winning bids and for the informationally robust comparison of alternative bidding mechanisms.
Keywords: first-price auction; information structure; Bayes correlated equilibrium; private values; interdependent values; common values; revenue; surplus; welfare bounds; reserve price
JEL Codes: C72; D44; D82; D83
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| distribution of winning bids (D44) | lower bound distribution (D39) |
| information structure (L15) | equilibrium outcomes (D51) |
| minimum winning-bid distribution (D44) | average of n-1 lowest values (C29) |
| distribution of values (C46) | bids made (D44) |
| bids made (D44) | revenue generated (H27) |
| equilibrium distribution of winning bids (D44) | upward deviations in bidding strategies (D44) |