Dan Levin

Presenter: Dan Levin 

Paper: “Auction with two groups Private-Value bidders (PVB), and common-value (commercial) bidders.”

Abstract:  

We present a simple model of an auction environment with two groups of bidders: Those where each holds a Private-Values, and those where each holds a Private Signal (estimate) to a value that ex-post value is common (the same) all the bidders in this group. We study how having such two groups affects the efficiency properties of four, well studied, auction formats with only private-value bidders: First-Price (FPA), Second-Price (SPA), English (EA), and Dutch (DA). We show that in contrast to “pure” private-value auctions with symmetric equilibrium bidding, here the FPA, SPA, and the DA are not efficient.  Since bidders in each of the two groups use symmetric, but a different bidding strategy, these auctions are, in general, not efficiency, reminiscing pure FPA with heterogenous bidders, but for different economic reasons. The dynamic EA eliminates, or mitigates, the adverse selection faced by the common-value bidders in the previous static formats, thus, may help restore efficiency. However, this appealing intuition requires us to assume that the common value bidders recognize the bidders in their group.