Auctions With Leaks About Early Bids: Analysis and Experimental Behavior

Abstract

In sequential first‐ and second‐price private value auctions, second movers are informed about the first movers' bid with commonly known probability. Equilibrium bidding in first‐price auctions is mostly unaffected, but there are multiple equilibria in second‐price auctions affecting comparative statics across price rules. We show experimentally that informational leaks in first‐price auctions qualitatively confirm the theoretical predictions. In second‐price auctions, we analyze and experimentally confirm the existence of focal equilibria, and provide evidence for individual consistency in equilibrium selection. (JEL D44, C72, C91)

Strategic Leaks in First-Price Auctions and Tacit Collusion: The Case of Spying and Counter-Spying

“…4 Recently, Fischer, Güth, Kaplan, and Zultan (2021) compared the effects of spying in first-and second-price auctions, using the same framework as in Arozamena and Weinschelbaum (2009), where a corrupt auctioneer leaks a rival's bid to a favored bidder. However, while Arozamena and Weinschelbaum (2009) consider only a first-price auction, and show that leaked information does not affect the behavior of the spied at bidder, the main focus of Fischer, Güth, Kaplan, and Zultan (2021) is the role of behavioral assumptions in second-price auctions and their testing in a controlled lab experiment. 5 Of course, spying in second-price auctions can only make a difference if bidders do not play the weakly dominant strategy of truthful bidding and instead engage in spiteful bidding or abstain from bidding if they see no chance to win.…”

Who cares when Value (Mis)reporting may be found out? An Acquiring-a-Company experiment with value messages and information leaks

“…More generally, commonly anticipated "leak" events allow for continuous classes of hybrid games, in our case including the deterministic border cases where the leak probability is either 1 or 0. See alsoFischer et al (2021), who theoretically analyze leaks in sequential auctions.…”