Information Choice in Auctions

Abstract

The choice of an auction mechanism influences which object characteristics bidders learn about and whether the object is allocated efficiently. Some object characteristics are valued equally by all bidders and thus are inconsequential for the efficient allocation. Others matter only to certain bidders and thus determine the bidder with the highest valuation. I show when the second-price auction is ex ante efficient by inducing bidders to seek socially relevant information. When facing a continuous learning trade-off, bidders learn more about socially relevant components and less about common characteristics of the object in a second-price auction than a first-price auction. (JEL D44, D83)