Collaborative Research: Information Revelation Policies for Sellers at Auction

Arizona State University, Scottsdale AZ

Investigators

Abstract

Award Abstract Sellers often have or may acquire proprietary information about the value of the object to be sold. A conventional wisdom from auction theory is that a seller at auction will increase revenues on average by adopting a policy of always revealing all her available information about the object's value. Our project demonstrates that a seller will often do better by revealing no information. More generally, a policy of partial information revelation is better than both no revelation and full revelation. Full revelation policies unambiguously enhance revenue only under special circumstances. Despite this limitation, full revelation has been routinely advocated and adopted by sellers. For instance, a full revelation policy was adopted by the FCC in its design of spectrum auctions. Similar policies were subsequently implemented by other nations selling spectrum rights. We demonstrate that quite generally the seller can increase her expected revenue by carefully crafting a policy that conceals part of her information. We describe a procedure for crafting such a policy.