DP2991 Information Structures in Optimal Auctions

Author(s): Dirk Bergemann, Martin Pesendorfer
Publication Date: October 2001
Keyword(s): information structures, optimal auction, partitions, private values
JEL(s): C72, D44, D82, D83
Programme Areas: Industrial Organization
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=2991

A seller wishes to sell an object to one of multiple bidders. The valuations of the bidders are privately known. We consider the joint design problem in which the seller can decide the accuracy by which bidders learn their valuation and to whom to sell at what price. We establish that optimal information structures in an optimal auction exhibit a number of properties: (i) information structures can be represented by monotone partitions; (ii) the cardinality of each partition is finite; (iii) the partitions are asymmetric across agents. These properties imply that the optimal selling strategy of a seller can be implemented by a sequence of exclusive take-it or leave-it offers.