Interdependent Value Auctions with an Insider Bidder

Jinwoo Kim

Professor, Department of Economics, Seoul National University, 1 Gwanak-ro Gwanak-gu, Seoul 151-742, South Korea, Tel: +82-2-880-6448, Fax: +82-2-886-4231 jikim72@snu.ac.kr

JEL Classification: C92, D44, D82

Abstract

We study the efficiency of standard auctions with interdependent values in which one of two bidders is perfectly informed of his value while the other is partially informed. The second-price auction, as well as English auction, has a unique ex-post equilibrium that yields efficient allocation. By contrast, the first-price auction has no efficient equilibrium.

Keywords:

Interdependent value, Insider, Second-price auction, First-price auction

Acknowledgments

This work was supported by the National Research Foundation of Korea Grant funded by the Korean Government (NRF-2014S1A5A2A03065638).

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