Knowing What Matters for Others: Information Choice in Auctions
Research SeminarsAn object for sale has a common component and a idiosyncratic private component. After the seller commits to an auction format, the bidders decide between learning about the common or the idiosyncratic component. If they learn more about their common component, their estimates are correlated stronger than if they learn about the idiosyncratic component. Bidders' incentives to know what matters for others differ with the chosen auction format. The second price auction induces the least correlation, and allocates the object efficiently. The first price auction has the opposite effect: it induces the highest correlation, and allocates inefficiently.
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