A Theory of Auctions and Competitive Bidding

Milgrom, P. R., & Weber, R. J. (1982). A Theory of Auctions and Competitive Bidding. Econometrica, 50(5), 1089-1122.

Type

Journal article

Intellectual base

Primary research

Year

1982

DOI

10.2307/1911865

Link

https://doi.org/10.2307/1911865

Cited from

economics_finance, information_theory

Cited by

2 citations across 2 artifacts.

Each citation links to the sentence it supports in the citing article.

Primes

• Auction Theory
  • For common-value auctions (where the item has an unknown common true value and bidders receive noisy signals), the abstract structure shifts, as Milgrom and Weber (1982) formalize in their general affiliated-information auction model.

    This sourceUnifies private-, common-, and correlated-value settings under affiliation and derives the linkage principle (revealing information raises expected revenue in affiliated settings)

• Winner's Curse
  • The gap between them — strictly negative for the winner under common-value competition — is the curse, and the structural insight is that this gap is a deterministic consequence of order-statistic selection, not a contingent feature of any particular auction format.

    This sourceGeneral affiliated-values auction theory establishing that the gap between unconditional value and value conditional on winning is a format-independent order-statistic consequence, that optimal bidding requires shading that rises with competition and uncertainty, and that in equilibrium all bidders shade so winning prices embed the collective correction.

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