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The B.E. Journal of Theoretical Economics

Editor-in-Chief: Schipper, Burkhard

Ed. by Fong, Yuk-fai / Peeters, Ronald / Puzzello , Daniela / Rivas, Javier / Wenzelburger, Jan

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Affiliated Common Value Auctions with Differential Information: The Two Bidder Case

Sergio O. Parreiras
Published Online: 2006-12-17 | DOI: https://doi.org/10.2202/1534-5971.1304

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.

Keywords: auctions; asymmetric information; differential information; revenue-ranking; linkage-principle

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Published Online: 2006-12-17

Citation Information: Contributions in Theoretical Economics, Volume 6, Issue 1, Pages 1–19, ISSN (Online) 1534-5971, DOI: https://doi.org/10.2202/1534-5971.1304.

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