| Abstract: |
We study a symmetric private value auction with signaling, in which the
auction outcome is used by an outside observer to infer the bidders’ types. We
elicit conditions under which an essentially unique D1 equilibrium bidding
function exists in the second-price auction and the English auction. We
establish there is no equivalence between these two auction designs, neither
in bidding strategies nor in expected revenue. This is because the presence or
absence of an increasing price clock, affects signaling incentives differently
in both auction formats, and thereby also the bidders’ incentives to overbid
their types. This leads to a strictly higher expected revenue in the
second-price auction than in the English auction. Our analysis is completed by
a comparison with other disclosure policies. Applications include art auctions
and charity auctions. |