Auction Theory, 2nd Edition

Chapter | Six

Auctions with

Interdependent Values

In this chapter we simultaneously relax two major assumptions regarding the

nature of the information available to the bidders.

Interdependent Values

First, we relax the assumption of private values—that each bidder knows the

value of the object to himself—by allowing for the possibility that bidders have

only partial information regarding the value, say in the form of a noisy signal.

Indeed, other bidders may possess information that would, if known to a partic-

ular bidder, affect the value he assigns to the object. The resulting information

structure is called one of interdependent values. We assume that each bidder has

some private information concerning the value of the object. Bidder i’s private ...