Efficiency and information aggregation in auctions

Wolfgang Pesendorfer*, Jeroen M. Swinkels

*Corresponding author for this work

Research output: Contribution to journalArticle

53 Scopus citations

Abstract

The tension between allocative efficiency and information aggregation is explored in the context of an auction: k identical objects of unknown quality are auctioned off to n bidders whose tastes affect their valuation of an object of given quality. Bidders receive a signal about the quality of the objects. The k highest bidders get an object and pay a price equal to the k + 1st highest bid. We find conditions under which, in the limit, objects are allocated efficiently to those with the highest tastes, and price converges in probability to the value of an object to the marginal taste type.

Original languageEnglish (US)
Pages (from-to)499-525
Number of pages27
JournalAmerican Economic Review
Volume90
Issue number3
DOIs
StatePublished - Jun 2000

ASJC Scopus subject areas

  • Economics and Econometrics

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