Knowing what matters to others: information selection in auctions

In this seminar Nina Bobkova will be discussing her paper on Knowing what matters to others: information selection in auctions

Abstract:

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 themselves). Bidders choose about which of the two components they want to acquire noisy information.  Learning about the private component yields independent estimates, whereas learning about the common component leads to correlated information between the bidders.

I show that in a second price auction, reducing correlation guarantees a bidder the same expected gain for a strictly lower payment. Information selection in equilibrium is unique: bidders only learn about their private component in the second-price auction.  Thus, an independent private value framework arises endogenously. In an all-pay auction, bidders also prefer information about the private component. In a first price auction, increasing correlation strictly elevates the payoff for a bidder under certain conditions.