Efficiency and Information Aggregation in Auctions

Wolfgang Pesendorfer · Jeroen M. Swinkels

141 citations0/0 files storedAmerican Economic Review

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Auction Theory and Applications Game Theory and Voting Systems Game Theory and Applications

Abstract

The tension between allocative efficiency and information aggregation is explored in the context of an auction: k identical objects of unknown quality are auctioned off to n bidders whose tastes affect their valuation of an object of given quality. Bidders receive a signal about the quality of the objects. The k highest bidders get an object and pay a price equal to the k + 1st highest bid. We find conditions under which, in the limit, objects are allocated efficiently to those with the highest tastes, and price converges in probability to the value of an object to the marginal taste type. (JEL D44, D82)

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References

1982A Theory of Auctions and Competitive Bidding 1976Information and Competitive Price Systems 1977A Bidding Model of Perfect Competition 1997Voting Behavior and Information Aggregation in Elections With Private Information 1981Rational Expectations, Information Acquisition, and Competitive Bidding 1979A Convergence Theorem for Competitive Bidding with Differential Information 2003Competitive Bidding in Auctions with Private and Common Values

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2002Efficiency in Auctions with Private and Common Values: An Experimental Study 2008Non-existence of equilibrium in Vickrey, second-price, and English auctions 1999Asymptotic Efficiency for Discriminatory Private Value Auctions 2004Informational Size and Efficient Auctions 2008Why Every Economist Should Learn Some Auction Theory 2011Information Sales and Strategic Trading 2005Allocative and Informational Externalities in Auctions and Related Mechanisms

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