Winner's bliss: interdependent-value auctions with horizontal uncertainty

Abstract

We analyze auctions with interdependent values and horizontally differentiated bidders, where good news for one bidder is bad news for the other bidders. This generates a winner's bliss, reversing the well-known winner's curse: winning means buying an object that is more valuable than a na\"{\i}ve estimate suggests. Our main result is about the English auction. We introduce the ``own effect property,''generalizing the single-crossing condition, to prove the existence of an efficient ex-post equilibrium. Regarding revenue, we show that with affiliated signals, the English auction yields no more revenue than the second-price auction, while independent signals yield the standard revenue equivalence.