Larson, N.; (2003) Private value preturbations ad informational advantage in common value auctions. (ELSE Working Papers 68). ESRC Centre for Economic Learning and Social Evolution: London, UK.

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Abstract

We analyze the value of being better informed than one’s rival in a two bidder, second price common value auction. In order to do so, we must pare down the continuum of equilibria that typically exists in this setting. We propose selecting an equilibrium that is robust to perturbing the common value of the object with small private value components. Under this selection, we show that having better information about the common value will frequently hurt rather than help a bidder and that the ratio of private value to common value information held by a bidder has a significant effect on the value of information.

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