Nina Bobkova, University of Bonn
"Knowing What Matters to Others: Information Selection in Auctions"
The valuation of bidders for an object consists of a common value component (which matters to all bidders) and a private value component (which is relevant only to individual bidders). Bidders select about which of these two components they want to acquire noisy information. Learning about a private component yields independent estimates, whereas learning about a common component leads to correlated information between bidders. I show that in a second price auction, information selection in equilibrium is unique. Bidders only learn about their private component, so an independent private value framework arises endogenously. If this were not the case, a bidder could guarantee himself the same expected gain and a strictly lower payment by decreasing correlation in private information. In an all-pay auction, bidders also prefer information about private components. In a first price auction, increasing correlation strictly elevates the payoff for a bidder under certain conditions
Contact person: Christoph Schottmüller