Working Paper: CEPR ID: DP7989
Authors: Dirk Bergemann; Johannes Hrnner
Abstract: We investigate the role of market transparency in repeated first-price auctions. We consider a setting with private and independent values across bidders. The values are assumed to be perfectly persistent over time.We analyze the first-price auction under three distinct disclosure regimes regarding the bid and award history. Of particular interest is the minimal disclosure regime, in which each bidder only learns privately whether he won or lost the auction at the end of each round. In equilibrium, the winner of the initial auction lowers his bids over time, while losers keep their bids constant, in anticipation of the winner's lower future bids. This equilibrium is efficient, and all information is eventually revealed. Importantly, this disclosure regime does not give rise to pooling equilibria.We contrast the minimal disclosure setting with the case in which all bids are public, and the case in which only the winner's bids are public. In these settings, an inefficient pooling equilibrium with low revenues always exists with a sufficiently large number of bidders.
Keywords: first price auction; information revelation; private bids; repeated auctions
JEL Codes: D44; D82; D83
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| auction transparency levels (D44) | bidders' strategies (D44) |
| bidders' strategies (D44) | auction revenues (D44) |
| minimal disclosure regime (G38) | winner lowers bids over time (D44) |
| losers maintain their bids (D44) | winner lowers bids over time (D44) |
| winner lowers bids over time (D44) | efficient equilibrium (D61) |
| observable bids (D44) | inefficient pooling equilibrium (D59) |
| more information (Y50) | mimic low-valuing bidders (D44) |
| mimic low-valuing bidders (D44) | ratchet effect (E32) |
| observable bids (D44) | collusive equilibria (C72) |
| collusive equilibria (C72) | depress revenues (H69) |
| unobservable bids (D44) | highest revenue (H27) |
| observable bids (D44) | lower revenues (H27) |