Optimal information disclosure in classic auctions

Bergemann, D., Heumann, T., Morris, S., Sorokin, C. and Winter, E. (2022) Optimal information disclosure in classic auctions. American Economic Review: Insights, 4(3), pp. 371-388. (doi: 10.1257/aeri.20210504)

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We characterize the revenue-maximizing information structure in the second price auction. The seller faces a classic economic trade-off: providing more information improves the efficiency of the allocation but also creates higher information rents for bidders. The information disclosure policy that maximizes the revenue of the seller is to fully reveal low values (where competition will be high) but to pool high values (where competition will be low). The size of the pool is determined by a critical quantile that is independent of the distribution of values and only dependent on the number of bidders. We discuss how this policy provides a rationale for conflation in digital advertising.

Item Type:Articles
Glasgow Author(s) Enlighten ID:Sorokin, Dr Constantine
Authors: Bergemann, D., Heumann, T., Morris, S., Sorokin, C., and Winter, E.
College/School:College of Social Sciences > Adam Smith Business School > Economics
Journal Name:American Economic Review: Insights
Publisher:American Economic Association
ISSN (Online):2640-2068
Copyright Holders:Copyright © 2022 AEA
First Published:First published in American Economic Review: Insights 4(3): 371-388
Publisher Policy:Reproduced in accordance with the publisher copyright policy

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