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Title:Ordinal cheap talk in common value auctions PDF Logo
Authors:Chakraborty, Archishman
Gupta, Nandini
Harbaugh, Rick
Editors:Claremont Institute for Economic Policy Studies
Issue Date:2002
Series/Report no.:Working paper series // Claremont Institute for Economic Policy Studies 2002-30
Abstract:Sellers benefit on average from revealing information about their goods to buyers, but the incentive to exaggerate undermines the credibility of seller statements. When multiple goods are being auctioned, we show that ordinal cheap talk, which reveals a complete or partial ordering of the different goods by value, can be credible. Ordinal statements are not susceptible to exaggeration because they simultaneously reveal favorable information about some goods and unfavorable information about other goods. Any informative ordering increases revenues in accordance with the linkage principle, and the complete ordering is asymptotically revenue-equivalent to full revelation as the number of goods becomes large. These results provide a new explanation in addition to bundling, versioning, and complementarities for how a seller benefits from the sale of multiple goods.
Subjects:linkage principle
winner's curse
cheap talk
JEL:D44
D82
L15
Document Type:Working Paper
Appears in Collections:Claremont Colleges Working Papers in Economics, Department of Economics, Claremont McKenna College

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