The value of information in a sealed-bid auction

Paul Milgrom*, Robert J. Weber

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

116 Scopus citations


In this paper, we explore bidders' incentives to gather information in auctions, when there is one bidder with only public information and another with some private information. We find that the bidder with only public information makes no profit at equilibrium, while the bidder with private information generally makes positive profits. Moreover, the informed bidder's profits rise when he gathers extra information, and the increase in greater when the information is collected overtly than when it is collected covertly. When the uniformed bidder can observe some of the better-informed bidder's information, he prefers to make his observations covertly. If the seller has access to some of the better-informed bidder's information, or if he has affiliated information of his own, he can raise the expected price by adopting a policy of making that information public. However, there are cases where a policy of publicizing his information would lower the expected price. The distinguishing feature of these latter cases seems to be that the seller's information is complementary to the information of the better-informed bidder.

Original languageEnglish (US)
Pages (from-to)105-114
Number of pages10
JournalJournal of Mathematical Economics
Issue number1
StatePublished - Jun 1982

ASJC Scopus subject areas

  • Economics and Econometrics
  • Applied Mathematics

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