Ignorance Promotes Competition: An Auction Model of Endogenous Private Valuations
Volume: Volume 35, No. 3
Issue: Autumn 2004
Pages: 583-598
Authors: Juan-José Ganuza
Title: Ignorance Promotes Competition: An Auction Model of Endogenous Private Valuations
Abstract: I study a situation in which an auctioneer wishes to sell an object to one of N risk-neutral bidders with heterogeneous preferences. The auctioneer does not know bidders' preferences but has private information about the characteristics of the object, and must decide how much information to reveal prior to the auction. I show that the auctioneer has incentives to release less information than would be efficient and that the amount of information released increases with the level of competition (as measured by the number of bidders). Furthermore, in a perfectly competitive market the auctioneer would provide the efficient level of information.