I Want to Tell You? Maximizing Revenue in First-Price Two-Stage Auctions

Galit Ashkenazi-Golan, Yevgeny Tsodikovich and Yannick Viossat
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Galit Ashkenazi-Golan: TAU - School of Mathematical Sciences [Tel Aviv] - TAU - Raymond and Beverly Sackler Faculty of Exact Sciences [Tel Aviv] - TAU - Tel Aviv University
Yevgeny Tsodikovich: AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique

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Abstract: A common practice in many auctions is to offer bidders an opportunity to improve their bids, known as a Best and Final Offer (BAFO) stage. This final bid can depend on new information provided about either the asset or the competitors. This paper examines the effects of new information regarding competitors, seeking to determine what information the auctioneer should provide assuming the set of allowable bids is discrete. The rational strategy profile that maximizes the revenue of the auctioneer is the one where each bidder makes the highest possible bid that is lower than his valuation of the item. This strategy profile is an equilibrium for a large enough number of bidders, regardless of the information released. We compare the number of bidders needed for this profile to be an equilibrium under different information settings. We find that it becomes an equilibrium with fewer bidders when no additional information is made available to the bidders compared to when information regarding the competition is available. As a result, from the auctioneer's revenue perspective, when the number of bidders is unknown, there are some advantages to not revealing information between the stages of the auction.

Keywords: auctions; multistage auctions; BAFO; information utilization (search for similar items in EconPapers)
Date: 2020-10-14
New Economics Papers: this item is included in nep-des, nep-gth and nep-mic
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-03078811
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Related works:
Journal Article: I want to tell you? Maximizing revenue in first-price two-stage auctions (2023)
Working Paper: I want to tell you? Maximizing revenue in first-price two-stage auctions (2023)
Working Paper: I Want to Tell You? Maximizing Revenue in First-Price Two-Stage Auctions (2021)
Working Paper: I Want to Tell You? Maximizing Revenue in First-Price Two-Stage Auctions (2020)
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