International Journal of Game Theory

, Volume 41, Issue 2, pp 219-254

First online:

Equilibrium and revenue in a family of common-value first-price auctions with differential information

  • David A. MaluegAffiliated withDepartment of Economics, University of California
  • , Ram OrzachAffiliated withDepartment of Economics, Oakland University Email author 

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We study a discrete common-value auction environment with two asymmetrically informed bidders. Equilibrium of the first-price auction is in mixed strategies, which we characterize using a doubly recursive solution method. The distribution of bids for the ex post strong player stochastically dominates that for the ex post weak player. This result complements Maskin and Riley’s (Rev Econ Stud 67:413–438, 2000) similar result for asymmetric private-value auctions. Finally, comparison with the dominance-solvable equilibrium in a second-price auction shows the Milgrom–Weber (Econometrica 50:1089–1122, 1982a) finding that the second-price auction yields at least as much revenue as the first-price auction fails with asymmetry: in some cases the first-price auction provides greater expected revenue, in some cases less.


First-price auction Second-price auction Revenue comparison

JEL Classification