Lu, Pinyan

Title:The Value of Information Concealment

Abstract: We consider a revenue optimizing seller selling a single item to a buyer, on whose private value the seller has a noisy signal. We show that, when the signal is kept private, arbitrarily more revenue could potentially be extracted than if the signal is leaked or revealed. We then show that, if the seller is not allowed to make payments to the buyer, the gap between the two is bounded by a multiplicative factor of 3, subject to fairly mild conditions on the joint distribution of the value and signal. Our examples show that both conditions are necessary for a constant bound to hold. We connect this scenario to multi-bidder single-item auctions where bidders' values are correlated. Results similar to the above are shown for the gap between the revenue of a Bayesian incentive compatible, ex post individually rational auction and that of a dominant strategy incentive compatible auction. Based on joint work with Hu Fu, Chris Liaw and Zhihao Gavin Tang.