Ignorance Promotes Competition: An Auction Model with Endogenous Private Valuations

UPF Economics and Business Working Paper No. 671

29 Pages Posted: 18 Sep 2003

See all articles by Juan-José Ganuza

Juan-José Ganuza

Universitat Pompeu Fabra - Faculty of Economic and Business Sciences

Date Written: March 2003

Abstract

We study a situation in which an auctioneer wishes to sell an object to one of N risk-neutral bidders with heterogeneous preferences. The auctioneer does not know bidders' preferences but has private information about the characteristics of the object, and must decide how much information to reveal prior to the auction. We show that the auctioneer has incentives to release less information than would be efficient and that the amount of information released increases with the level of competition (as measured by the number of bidders). Furthermore, in a perfectly competitive market the auctioneer would provide the efficient level of information.

Keywords: Auctions, private values, asymmetric information

JEL Classification: D44, D82, D83

Suggested Citation

Ganuza, Juan, Ignorance Promotes Competition: An Auction Model with Endogenous Private Valuations (March 2003). UPF Economics and Business Working Paper No. 671, Available at SSRN: https://ssrn.com/abstract=428165 or http://dx.doi.org/10.2139/ssrn.428165

Juan Ganuza (Contact Author)

Universitat Pompeu Fabra - Faculty of Economic and Business Sciences ( email )

Ramon Trias Fargas 25-27
Barcelona, 08005
Spain
(34-93) 542 27 19 (Phone)
(34-98) 542 17 46 (Fax)

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