Endogenous Information Acquisition on Opponents' Valuations in Multidimensional First Price Auctions

Tian, Guoqiang and Xiao, Mingjun (2007): Endogenous Information Acquisition on Opponents' Valuations in Multidimensional First Price Auctions.

Abstract

This paper investigates bidder's covert behavior of endogenous information acquisition on her opponents' valuations in first price auction model with independent private values. Such an information acquisition setting leads to bidimensional type space and bidimensional strategy space. We consider two different specifications of the environments: the ex ante information acquisition setting and the interim information acquisition setting. In equilibria the expected payoffs of the bidder under these specifications could exceed the counterpart payoffs of the corresponding standard sealed-bid auctions without information acquisition as long as the cost is small, but the auctioneer has lower payoffs in these models than those of the standard ones. Moreover, the incurred information cost becomes the deadweight loss, resulting in ine±cient outcomes.

• Item Type: MPRA Paper
• Language: English
• Keywords: First-price sealed-bid auctions, endogenous information acquisition, opponents' valuation, profitability
• Subjects: D - Microeconomics > D4 - Market Structure, Pricing, and Design > D44 - Auctions; C - Mathematical and Quantitative Methods > C7 - Game Theory and Bargaining Theory > C70 - General; D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D82 - Asymmetric and Private Information ; Mechanism Design

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