ECONOMICS SEMINAR SERIES (ESS) - 2024/2025

Speaker: Marco Pagnozzi (Federico II)

Title: Interim Information and Seller’s Revenue in Standard Auctions (con Federica Carannante e Elia Sartori).
 

Abstract
We study the expected seller’s revenue conditional on the valuation of a special bidder in the efficient equilibrium of a class of sealed-bid auctions with independent private values. Because a bidder’s transfer conditional on his own valuation is independent of the auction format by the Revenue Equivalence Theorem, differences across formats depend on a bidder’s transfer conditional on a competitor’s valuation. The first-price auction yields higher (lower) revenue than the second-price auction if the special bidder’s valuation is below (above) a threshold. If the valuation is low, the first-price auction also yields the highest revenue among all auctions in the class. If the valuation is high, the first-price auction yields the lowest revenue, while the last-pay auction — an atypical mechanism where only the lowest bidder pays — dominates and yields an arbitrarily large revenue. Our results suggest that if the seller is informed about a bidder, she may have incentive to manipulate the auction format, and apply directly to settings where other bidders treat the format as exogenous.