Abstract Auction models are convenient abstractions of informal price-formation processes that arise in markets for assets or services. These processes involve frictions like bidder recruitment costs for sellers, participation costs for bidders, and limitations on sellers’ commitment abilities. This paper develops an auction model that captures such frictions. We derive novel insights, notably that outcomes are often inefficient, that markets sometimes unravel, and that the observability of competition may have a large effect.

We study the aggregation of dispersed information in elections in which turnout may depend on the state. State-dependent turnout may arise from the actions of a biased and informed “election organizer”. Voters are symmetric ex ante and prefer policy a in state α and policy b in state β, but the organizer prefers policy a regardless of the state. Each recruited voter observes a private signal about the unknown state but does not learn the turnout. First, we characterize how the outcomes of large elections depend on the turnout pattern across states. In contrast to existing results for large elections, there are equilibria in which information aggregation fails whenever there is an asymmetry in turnout; information aggregation is only guaranteed in all equilibria if turnout is state independent. Second, when the turnout is the result of costly voter recruitment by a biased organizer, the organizer can ensure that its favourite policy a is implemented with high probability independent of the state as the voter recruitment cost vanishes. Moreover, information aggregation will fail in all equilibria. The critical observation is that a vote is more likely to be pivotal for the decision if turnout is smaller, leading to a systematic bias of the decision toward the low-turnout state.

This paper analyzes a search model with asymmetric information of the common values variety. The basic features of this environment resemble those of a common values (procurement) auction, except that the searcher in our model, who is the counterpart of the auctioneer in the auction model, encounters trading partners through costly sequential search. The main objective is to understand how the combination of search activity and information asymmetry affects prices and welfare. We specifically inquire about the extent of information aggregation by the price –how close the equilibrium prices are to the full information prices–when the search frictions are small. Roughly speaking, we conclude that information is aggregated less well in the search environment than it is in the corresponding auction environment. We trace this to a stronger form of winner’s curse that is present in the search scenario. This understanding is a central qualitative insight of this paper, which is likely to have implications beyond the narrow confines of our model. We also look at the efficiency perspective and examine the relations between total surplus and the informativenss of the signal technology available to the uninformed. We conclude that total surplus is not monotone in the quality of the signals.

We study a common value, first-price auction in which the number of bidders is endogenous: the seller (auctioneer) knows the value and solicits bidders at a cost. The number of bidders, which is unobservable, may thus depend on the true value. Therefore, being solicited conveys information. This solicitation effect may soften competition and impede information aggregation. Under certain conditions, there is an equilibrium in which the seller solicits many bidders, yet the resulting price is not competitive and fails to aggregate any information. More broadly, these ideas are relevant for markets with adverse selection in which informed traders initiate contacts. (JEL D44, D82)

This paper studies a large majority election with voters who have heterogeneous, private preferences and exogenous private signals. We show that a Bayesian persuader can implement any state-contingent outcome in some equilibrium by providing additional information. In this setting, without the persuader's information, a version of the Condorcet Jury Theorem holds. Persuasion does not require detailed knowledge of the voters' private information and preferences: the same additional information is effective across environments. The results require almost no commitment power by the persuader. Finally, the persuasion mechanism is effective also in small committees with as few as 15 members.

We introduce learning into an otherwise standard two-sided search-and-bargaining market. There is uncertainty about the price distribution due to uncertainty about an underlying exogenous state of relative demand: in the high state, buyers are on the long side; otherwise, they are on the short side. In equilibrium, prices are on average higher in the high state. Individual agents learn about the distribution while searching. Agents typically start out by experimenting with a tough bargaining position—buyers may initially insist on a low price and sellers on a high price. After successive failures to trade, agents become increasingly pessimistic about the market conditions and soften their bargaining stance. When frictions are small, equilibrium transaction prices are approximately market clearing, despite aggregate demand being unknown. Thus, the search-and-bargaining procedure enables price discovery in a decentralized market.