Research

This paper studies bidding behavior in concurrent auctions of two heterogeneous goods in which each bidder can only bid on one good. Both first-price and second-price auctions are considered. Each bidder has a private valuation of each good, thus having a two-dimensional type. After types realize, bidders simultaneously make (i) market entry decisions and (ii) bidding plans. It is shown that endogenous market entry leads to an unknown number of bidders in the auction markets, and self-selection effect, impacting the bidding behavior in auctions. We define a monotone entry equilibrium as an equilibrium where each bidder enters the higher-value market. Under independent information, a monotone entry equilibrium always exists in both first-price and second-price auctions. In affiliated private value second-price auctions, bidders may deviate to bid on the less favorable objects when the valuations are highly correlated across bidders.

This paper examines the social value of public information by considering how ambiguity averse agents interact under incomplete information. This work enriches the beauty contest framework with ambiguity and ambiguity aversion. We adopt the smooth model in Klibanoff, Marinacci, and Mukerji (2005) to represent the preferences of ambiguity averse agents. We then characterize the equilibrium and efficient allocations of an economy featuring (1) incomplete information over ambiguous fundamental and (2) ambiguity averse agents. By decomposing welfare, the efficiency loss due to dispersion, volatility, and pessimism can be separated, where pessimism is the novel effect to the literature. Different policy implications are raised, such that when people demonstrate strong pessimism, (e.g. during recessions), more public information should be disseminated to restore confidence and correct pessimistic behavior.