The Choice of Eliminating the Uncertainty Cloud in Auctions

This paper investigates auction settings where bidders private values depend on a common value element which encapsulates some inherent uncertainty concerning its value. In particular, we are interested in scenarios where the auctioneer may have access to accurate information that eliminates the uncertainty concerning the common value. The auctioneer in this case should reason about whether or not to disclose that information, or part of it, to the bidders. In particular, we distinguish between the case where the bidders are aware of the existence of such information on the auctioneer’s side and when they are unaware of its existence. We show that the auctioneer’s decision of whether to disclose information to the bidders is environment-dependent and affected by various factors, such as the number of bidders, the bidders’ valuation functions and the a-priori level of uncertainty associated with the common value. Furthermore, we show that the awareness of the bidders to the option to obtain more accurate information plays a significant role in the decision of whether or not to disclose such information.