A BEJTE Contributions article.

Abstract

I study affiliated, pure common-value auctions with ex-ante asymmetric buyers. For the two-buyer case I characterize and prove uniqueness of the equilibrium of hybrid auctions where the payment is a weighted average of the highest and second-highest bids. A recursive method to explicitly compute the equilibrium is presented. It is shown that any hybrid auction yields at least as much revenue as the first-price auction. In particular, the equilibrium of the second-price auction, obtained in the limit by letting the weight of the highest bid go to zero, revenue-dominates the first-price auction.

Submitted: April 21, 2006 · Accepted: June 24, 2006 · Published: December 17, 2006

Originally published in Contributions to Theoretical Economics.

Recommended Citation

Parreiras, Sergio O. (2006) "Affiliated Common Value Auctions with Differential Information: The Two Bidder Case," Contributions to Theoretical Economics: Vol. 6 : Iss. 1, Article 12.
Available at: http://www.bepress.com/bejte/contributions/vol6/iss1/art12