Working Paper: NBER ID: w22836
Authors: John Asker; Chaim Fershtman; Jihye Jeon; Ariel Pakes
Abstract: We investigate the impact of information sharing between rivals in a dynamic auction with asymmetric information. Firms bid in sequential auctions to obtain inputs. Their inventory of inputs, determined by the results of past auctions, are privately known state variables that determine bidding incentives. The model is analyzed numerically under different information sharing rules. The analysis uses the restricted experience based equilibrium concept of Fershtman and Pakes (2012) which we refine to mitigate multiplicity issues. We find that increased information about competitors’ states increases participation and inventories, as the firms are more able to avoid the intense competition in low inventory states. While average bids are lower, social welfare is unchanged and output is increased. Implications for the posture of antitrust regulation toward information sharing agreements are discussed.
Keywords: Information Sharing; Dynamic Auctions; Antitrust Regulation; Asymmetric Information
JEL Codes: C63; C73; D43; K21; L41
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| increased information about competitors' states (D89) | higher participation rates (J49) |
| increased information about competitors' states (D89) | higher inventories (G31) |
| increased information about competitors' states (D89) | avoid intense competition in low inventory states (L13) |
| information sharing changes bidding behavior (C70) | facilitates transitions to more profitable states (P23) |
| increased information sharing (O36) | average bids decrease (D44) |
| increased information sharing (O36) | social welfare remains unchanged (I39) |
| information sharing (O36) | increases firm profits (L21) |
| information sharing (O36) | decreases auctioneer's surplus (D44) |
| information sharing (O36) | no significant impact on social surplus (D69) |