Strategic Use of Seller Information in Private-Value First-Price Auctions

In the framework of a private-value-first-price auction, we consider the seller as a player in a game with the buyers in which he has private information about their realized valuations. We ask whether the seller can benefit by using his private information strategically. We find that in fact, depending upon his information, set of signals, and commitment power the seller may indeed increase his revenue by strategic transmission of his information. For example, in the case of two buyers with values distributed independently and uniformly on [0,1], a seller informed of the private values of the buyers, can achieve a revenue close to 1/2 by sending verifiable messages (compared to 1/3 in the standard auction), and this is the largest revenue that can be obtained with any signalling strategy.