COWLES FOUNDATION FOR RESEARCH IN
ECONOMICS Box 208281
COWLES FOUNDATION DISCUSSION PAPER NO. 1619 Information Acquisition in Interdependent Value Auctions Dirk Bergemann, Xianwen Shi and Juuso Välimäki July 2007 We consider an auction environment with interdependent values. Each bidder can learn her payoff type through costly information acquisition. We contrast the socially optimal decision to acquire information with the equilibrium solution in which each agent has to privately bear the cost of information acquisition. In the context of the generalized Vickrey-Clarke-Groves mechanism, we establish that the equilibrium level exceeds the socially optimal level of information with positive interdependence. The individual decisions to acquire information are strategic substitutes. The difference between the equilibrium and the efficient level of information acquisition is increasing in the interdependence of the bidders' valuations and decreasing in the number of informed bidders. JEL Classification: C72, C73, D43, D83 Keywords: Vickrey-Clarke-Groves mechanism, Information acquisition, Strategic substitutes, Informational efficiency |
