Rates of information aggregation in common value auctions (Q1877164): Difference between revisions

In the paper, two standard types of auctions are considered: the \(k\)-unit uniform-price auction as in [\textit{W. Pesendorfer} and \textit{J. Swinkels}, Econometrica 65, 1247--1281 (1997; Zbl 0887.90052)] and the single unit irrevocable dropout English auction [\textit{P. Milgrom} and \textit{R. Weber}, Econometrica 50, 1089--1122 (1982; Zbl 0487.90017)]. The authors study uniform-price auctions in which \(k\) identical objects of an unknown value are auctioned off to \(n\) bidders, where \(n\), \(k\) are allowed to diverge to infinity and \(\frac{k}{n}\) converges to a number in \([0,1)\). They show that under the Wilson assumptions [\textit{R.Wilson}, Rev. Econ. Stud. 44, 511--518 (1977; Zbl 0373.90012)] the price aggregates the information at a rate proportional to \(\frac{n}{\sqrt{k}}\) and in the Pesendorfer-Swinkels [loc. cit.] framework that the price is proportional to \(\sqrt{k}\). Concerning the English auctions, the results are as follows: in the Wilson setup the rate of information aggregation is proportional to the number of bidders and under the Pesendorfer and Swinkels assumptions that the rate is proportional to the square root of the number of bidders.