Journal of Economic Theory 109 (2003) 264–282
Private information revelation in common-value auctions
Vlad Maresa and Ronald M. Harstadb, a Olin School of Business at Washington University in St. Louis, 1 Brookings Dr., Campus Box 1133, St. Louis, MO 63130-4899, USA b Rutgers Business School and Rutgers University, 640 Bartholomew Rd., Piscataway, NJ 08854-8003, USA
Received 6 March 2002; final version received 4 November 2002
Abstract
When a seller has information that could help bidders to estimate asset value, a dictum of auction theory has been that all such information should be publicly announced to bidders. The possibility of privately revealing this information to one or more bidders is introduced. Seller in some circumstances may attain higher expected revenue through revealing his information privately. Examplesshowthat the role of private revelation ismore complex than simply generating bidder asymmetry. r 2003 Elsevier Science (USA). All rights reserved.
JEL classification: D44; D82
Keywords: Auctions; Public Information; Information revelation; Linkage principle
1. Introduction
The question of whether a seller possessing an appraisal of an asset to be auctioned (or possessing other information affiliated with asset value) should disclose this information to bidders has been central to the strategic analysis of auctionsfor decades.Milgrom and Weber [17] find that, out of an abstract set specifying policies for revealing information (including censored, noisy, or partial revelation), fully and publicly announcing all information a seller possesses is the