We consider a large market where auctioneers with private reservation values compete
for bidders by announcing cheap-talk messages. If auctioneers run efficient first-price auctions,
then there always exists an equilibrium in which each auctioneer truthfully reveals
her type. The equilibrium is constrained efficient, assigning more bidders to auctioneers
with larger gains from trade. The choice of the trading mechanism is crucial for the result.
Most notably, the use of second-price auctions (equivalently, ex post bidding) leads to the
non-existence of any informative equilibrium. We examine the robustness of our finding in
various dimensions, including finite markets and equilibrium selection.
- competing auctions
- cheap talk
- directed search