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A Convergence Theorem for Competitive Bidding with Differential Information
Paul R. Milgrom
Vol. 47, No. 3 (May, 1979), pp. 679-688
Published by: The Econometric Society
Stable URL: http://www.jstor.org/stable/1910414
Page Count: 10
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This paper investigates the behavior of the winning bid in a sealed bid tender auction where each bidder has private information. With an appropriate concept of value, the winning bid will converge in probability to the value of the object auction (as the number of bidders grow large) if and only if a certain information condition is satisfied. In particular, it is not necessary for any bidder to know the value at the time the bids are submitted. These results bear on the relationship between price and value and on the aggregation of private information by the auction mechanism.
Econometrica © 1979 The Econometric Society