Efficient Competition Through Cheap Talk: The Case of Competing Auctions

Kyungmin Kim, Philipp Kircher

Research output: Contribution to journalArticle

14 Citations (Scopus)

Abstract

We consider a large market where auctioneers with private reservation values compete for bidders by announcing cheap-talk messages. If auctioneers run efficient first-price auctions, then there always exists an equilibrium in which each auctioneer truthfully reveals her type. The equilibrium is constrained efficient, assigning more bidders to auctioneers with larger gains from trade. The choice of the trading mechanism is crucial for the result. Most notably, the use of second-price auctions (equivalently, ex post bidding) leads to the nonexistence of any informative equilibrium. We examine the robustness of our finding in various dimensions, including finite markets and equilibrium selection.

Original languageEnglish (US)
Pages (from-to)1849-1875
Number of pages27
JournalEconometrica
Volume83
Issue number5
DOIs
StatePublished - Jan 1 2015
Externally publishedYes

Fingerprint

Auctions
Cheap talk
Equilibrium selection
Trading mechanism
Market selection
Bidding
Reservation
Gains from trade
First-price auction
Robustness
Second-price auction

Keywords

  • Cheap talk
  • Competing auctions
  • Directed search

ASJC Scopus subject areas

  • Economics and Econometrics

Cite this

Efficient Competition Through Cheap Talk : The Case of Competing Auctions. / Kim, Kyungmin; Kircher, Philipp.

In: Econometrica, Vol. 83, No. 5, 01.01.2015, p. 1849-1875.

Research output: Contribution to journalArticle

Kim, Kyungmin ; Kircher, Philipp. / Efficient Competition Through Cheap Talk : The Case of Competing Auctions. In: Econometrica. 2015 ; Vol. 83, No. 5. pp. 1849-1875.
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