Document Type
Discussion Paper
Publication Date
1-29-2021
CFDP Number
2318
CFDP Pages
23
Journal of Economic Literature (JEL) Code(s)
D44, D47, D83, D84
Abstract
We characterize the revenue-maximizing information structure in the second price auction. The seller faces a classic economic trade-o¤: 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.
Recommended Citation
Bergemann, Dirk; Heumann, Tibor; Morris, Stephen; Sorokin, Constantine; and Winter, Eyal, "Optimal Information Disclosure in Auctions" (2021). Cowles Foundation Discussion Papers. 2672.
https://elischolar.library.yale.edu/cowles-discussion-paper-series/2672