First Price Auctions with General Information Structures: Implications for Bidding and Revenue

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, entry fee

JEL Classification: C72, D44, D82, D83

Suggested Citation: Suggested Citation

Bergemann, Dirk and Brooks, Benjamin A. and Morris, Stephen Edward, First Price Auctions with General Information Structures: Implications for Bidding and Revenue (September 17, 2016). Princeton University William S. Dietrich II Economic Theory Center Research Paper No. 071_2015, Available at SSRN: https://ssrn.com/abstract=2641958 or http://dx.doi.org/10.2139/ssrn.2641958