Optimal Auctions with Information Acquisition

Download or read book Optimal Auctions with Information Acquisition written by Xianwen Shi and published by . This book was released on 2012 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper studies optimal auction design in a private value setting with endogenous information gathering. We develop a general framework for modeling information acquisition when a seller wants to sell an object to one of several potential buyers, who can each gather information about their valuations prior to participation in the auction. We first demonstrate that the optimal monopoly price is always lower than the standard monopoly price. We then show that standard auctions with a reserve price remain optimal among symmetric mechanisms, but the optimal reserve price lies between the ex ante mean valuation of bidders and the standard reserve price in Myerson (1981). Finally, we show that the optimal asymmetric mechanism softens the price discrimination against quot;strongquot; bidders.