Auction and the informed seller problem |
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Authors: | B Jullien T Mariotti |
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Institution: | aUniversité de Toulouse I, GREMAQ (UMR CNRS 5604) and IDEI, 21 Allée de Brienne, 31000 Toulouse, France;bDepartment of Economics, London School of Economics and Political Science, Houghton Street, WC2A 2AE London, UK |
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Abstract: | A seller possessing private information about the quality of a good attempts to sell it through a second-price auction with announced reserve price. The choice of a reserve price transmits information to the buyers. We characterize the equilibria with monotone beliefs of the resulting signaling game and show that they lead to a reduced probability of selling the good compared to the symmetric information situation. We compare the unique separating equilibrium of this signaling game to the equilibrium of a screening game in which an uninformed monopoly broker chooses the trading mechanism. We show that the ex ante expected probability of trade may be larger with a monopoly broker, as well as the ex ante total expected surplus. |
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Keywords: | Auctions Adverse selection Signaling Intermediation |
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