Manipulating Information Providers Access to Information in Auctions - Technologies and Applications of Artificial Intelligence - page 15

the social planner. Many researchers have explored this issue in both theoretical
and empirical manners [9,12]. In particular, this issue becomes more relevant in
auction settings where the auctioned item involves an uncertain common value
element [11,29,14,13,20,21,4]. For example, the board of a firm for sale can choose
which part of the firm's client list or its sales forecast will be disclosed to the
potential buyers. The decision regarding the information disclosure directly af-
fects bidders' valuation of the auctioned item and consequently also the winner's
determination and the auctioneer's expected revenue.
More often, information regarding the common value element is not available
to the auctioneer before the auction. However, the auctioneer may use some
relevant expert services termed external information provider. This situation is
common in scenarios where information discovery involves special expertise or
equipment the auctioneer does not own. Specifically, in the scenario of a firm for
sale, the information may pertain to the financial stability of key clients of the
firm, hence typically offered for sale in the form of business analysts' reports.
In such situations the auctioneer's responsibility is to decide both whether to
purchase the information and whether to disclose it fully or partially to bidders
when purchased. Such scenarios become much more complex when the infor-
mation provider acts strategically, controlling the accuracy of the information
provided and its price.
Prior work in such settings assumed strategic behavior on the auctioneer and
the information provider sides. However, the auctioneer's strategy was limited
to the choice of the information to be disclosed to the buyers [4,11] while the
information provider's strategy was limited to setting the price of the information
provided (i.e., assume the information provided is fully certain and captures the
exact common value [34]).
In this paper we extend the model to the more realistic case, where the infor-
mation provider cannot guarantee the identification of the true common value,
but rather can offer a more precise estimate of this variable. In particular we
focus on the case in which the information provider can only eliminate some of
the possible values and cannot fully distinguish between others. For example in
the example of the firm, it is possible that the information provider will be able
to classify customers as ”good” and ”bad” where each category spans a wide
range of possible values. Similarly, it is possible that the information provider
will be able to distinguish between strong and weak sales forecasts, but will not
be able to differentiate between a wide range slightly above or below the average
sales figures.
To this end, the paper's contribution is twofold:
- We augment the three-ply equilibrium analysis (considering the strategic
behavior of the information provider, the auctioneer and the bidders) to
cases where the information provider can reduce the uncertainty associated
with the common value rather than provide its true value.
- We illustrate a beneficial, yet somewhat non-intuitive, strategic behavior
of the auctioneer. In particular, this behavior is the auctioneer's choice to
intentionally limit the information provider's (e.g., the analyst) ability to