DP11782 First Price Auctions with General Information Structures: Implications for Bidding and Revenue

Author(s): Dirk Bergemann, Benjamin A Brooks, Stephen Morris
Publication Date: January 2017
Keyword(s): Bayes correlated equilibrium, common values, First-price auction, information structure, interdependent values, private values, reserve price, revenue, surplus, welfare bounds
JEL(s): C72, D44, D82, D83
Programme Areas: Industrial Organization
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=11782

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.