We analyse auctions when individuals have ambiguity over the joint
information structures generating the valuations and signals of
players. We analyse how two standard auction effects interact with
the ambiguity of bidders over correlation structures. First, a
competition effect arises when different beliefs about the
correlation between bidders' valuations imply different
likelihoods of facing competitive bids. Second, a
effect arises when different beliefs imply different inferences
about the winner's value. In the private values case, only the
first effect exists and this implies that the distribution of bids
first order stochastically dominates the distribution of bids in
the absence of ambiguity. In common value auctions both effects
exist and we show that compared to the canonical model, both in
the first-price and second-price auctions, these effects combine
to imply that the seller's revenue decreases with ambiguity (in
contrast with the private values case). We then characterise the
optimal auction in both the private and common value cases. A
novel feature that arises in the optimal mechanism in the common
values case is that the seller only partially insures the high
type against ambiguity.
This paper revisits the classic mechanism design question of when buyers with private information in an auction setting can expect to receive economic rents. It is well known that under standard assumptions, the seller can fully extract rent for generic prior distributions over the valuations of the buyers. However, a crucial assumption underlying this result is that the buyers are not able to acquire any additional information about each other. This assumption can be seen as a special case of a general model where buyers have access to some information acquisition technology. We provide necessary and sufficient conditions on the information acquisition technology for the seller to be able to guarantee full rent extraction, and we show that the set of information acquisition technologies where these conditions are satisfied is small in a topological sense.
This paper characterises the equilibrium payoff set of a repeated game with local interaction and local monitoring. A sequentially rational Nash threats folk theorem holds without any restrictions on the network structure when players are arbitrarily patient, i.e. any feasible payoff above the Nash equilibrium point can be approximated arbitrarily well in sequential equilibrium. No form of communication or coordination device is required. When players discount the future, the folk theorem cannot hold unless further restrictions are made either on payoffs or the network structure.