SEMINAR: Asymmetric Information Quality in Multiple-Object Auctions

Abstract: The paper reports on the effects of one-sided imperfect information on bidding behaviour and the formation of prices in first-price auctions of multiple non-identical objects. It focusses on the comparison of simultaneous auction procedures (in which the objects are sold at once) to sequential auction procedures (in which the objects are sold one after the other) and attention is drawn on the effects of the quality of the buyers' information about the assets to be sold on their bidding behaviour and on the seller's revenues. The analysis yields the following main predictions. First, when the objects are different and sold in sequence, the seller is always better off selling the most valuable object first. Second, the more the objects are different and the more the sequential format favours the informed bidder. Third, changing the order of sales of different objects does not always lead the seller to prefer the sequential format. Fourth, simultaneous auctions are mostly preferred when the objects are likely to be of high value and the precision of the informed bidder's signal is high. Fifth, when the asset is perfectly divisible, the seller is always better off selling this asset sequentially.