The value of an informed bidder in common value auctions

To link to full-text access for this article, visit this link: http://dx.doi.org/10.1016/j.jet.2008.01.001 Byline: Jinwoo Kim Keywords: Common value; First-price auction; Informed bidder Abstract: I compare two information structures in a common value first-price auction with two bidders: In one, each of the two bidders knows only his own signal about the value of the object, and in the other, one of the bidders learns his opponent's signal as well. Gaining the additional information in the second information structure makes the informed bidder worse off if the value is submodular in the bidders' signals and better off if it is supermodular. If the value is supermodular, then the seller's revenue tends to be lower with the informed bidder than without. Author Affiliation: School of Economics, Yonsei University, Seoul 120-749, Republic of Korea Article History: Received 30 November 2006; Revised 6 November 2007; Accepted 3 January 2008