Side-communication yields efficiency of ascending auctions: The two-items case

► Study signaling in ascending auctions and its effect on social efficiency. ► Analyze two substitutesʼ items: without signaling, no ex-post efficient equilibrium exists. ► In contrast, with signaling: show an ex-post equilibrium that is ex-post efficient. ► On the equilibrium path: initially report true demands, then a single demand reduction. ► This demand reduction is determined via a single communication bit.