COWLES FOUNDATION FOR RESEARCH IN ECONOMICS
AT YALE UNIVERSITY

Box 208281
New Haven, CT 06520-8281

COWLES FOUNDATION DISCUSSION PAPER NO. 1900

Sequential Information Disclosure in Auctions

Dirk Bergemann and Achim Wambach

July 2013

We consider the design of an optimal auction in which the seller can determine the allocation and the disclosure rule of the mechanism. Thus, in contrast to the standard analysis of a optimal auctions, the seller can explicitly design the disclosure of the information received by each bidder as his private information.

We show that the optimal disclosure rule is a sequential disclosure rule, implemented in an ascending price auction. In the optimal disclosure mechanism, each losing bidder learns his true valuation, but the winning bidder only learns that his valuation is sufficiently high to win the auction. We show that in the optimal auction, the posterior incentive and participation constraints of all the bidders are satisfied. In the special case in which the bidders have no private information initially, the seller can extract the entire surplus.

JEL Classification: C72, D44, D82, D83

Keywords: Independent private value auction, Sequential disclosure, Ascending auctions, Information structure, Interim equilibrium, Posterior equilibrium