Optimal auction design with aftermarket Cournot competition (Q6565029)

In this paper, the authors combine optimal information design with optimal auction design in a model with asymmetric bidders, where the winning bidder in the auction will engage in a differentiated Cournot competition with a third party in an aftermarket. Bidders' private information relates to their costs of production and this information is important to the third party in determining his equilibrium quantity of production. The seller has full discretion in designing the auction, but she cannot dictate firms' decisions in the aftermarket, i.e., firms can fully decide on their outputs. The seller's information design problem is to commit to a disclosure policy at the start of the auction concerning the extent to which the bidders' private costs information will be transmitted afterwards to the third party. Section 4 contains some concluding remarks and the Appendix contains some omitted proofs.