Equilibrium in a Family of Common-Value First-Price Auctions with Differential Information
51 Pages Posted: 27 Feb 2006 Last revised: 22 May 2008
Date Written: May 12, 2008
Abstract
Equilibrium strategies are explicitly derived for a family of two-bidder common-value first-price auctions in which players have ex ante different information represented by finite partitions of the set of possible values for the object being sold. The distribution of bids for the ex post strong player stochastically dominates that for the ex post weak player. Comparison with the dominance-solvable equilibrium in a second-price auction shows the Milgrom-Weber finding that the second-price auction yields at least as much revenue as the first-price auction fails with asymmetry: in some cases the first-price auction provides greater expected revenue, in some cases less.
Keywords: First-price auction, second-price auction, revenue comparison
JEL Classification: D72
Suggested Citation: Suggested Citation