Investigating potential purchases, such as a start-up company to acquire, is often a substantial investment under uncertainty. Standard market designs, such as simultaneous or ascending price auctions, compound this with additional uncertainty about the eventual price a bidder will have to pay in order to win. As a result they tend to confuse the process of search by leading to both wasteful information acquisition on goods that have already found a good purchaser and discouraging needed investigations of objects, potentially eliminating all gains from trade. Fully efficient procedures that avoid these problems, such as dynamic Vickrey-Clarke-Groves processes, are extremely complex and fragile. By contrast, we show that the Dutch auction preserves all of its properties from a standard setting without information costs because it guarantees, at the time of information acquisition, a price at which the good can be purchased. Our main result pertains to a model in which a single item is auctioned to a set of bidders who initially do not know their value for obtaining the item. Bidders have (potentially correlated) private types that determine the distribution from which their value is sampled, as well as the cost of learning their value. Conditional on the profile of bidders' types, values are independent random variables. This setting constitutes an auction-theoretic counterpart of Weitzman's (1979) model of optimal search, and an initial step of our analysis furnishes a novel proof of optimality of Weitzman's "Pandora's rule" by reinterpreting that procedure using the theory of real options. Specifically, we define for each bidder a random variable -the "covered call value" -that corresponds to the value of selling a call option to an external party to cover the cost of her information acquisition, while committing to refund to this external party any value in excess of a predefined "strike price" chosen so that the fair value of the option exactly matches the information acquisition cost. We prove that the equilibria of the Dutch auction in our setting are in one-to-one correspondence with first-price auction equilibria in a standard private-value setting without information acquisition costs, but with bidders' values modified to match their covered call values in the original setting. This correspondence preserves both welfare and revenue, and consequently all of the properties of standard first-price auction equilibria (e.g. full efficiency in symmetric settings and approximate efficiency in asymmetric settings) are preserved in our model. By contrast, we present examples illustrating that other standard market designs, including symmetric and ascending auctions, may perform arbitrarily poorly in our setting because, unlike the Dutch auction, they may leave bidders exposed, at the time of information acquisition, to the risk that the effective price they will face for purchase may be well above their strike price. Finally, we demonstrate the robustness of our finding regarding the approximate efficiency of Dutch auctions by presenting (non-nested) extensions of that result to settings with multiple items for sale, optional or multi-stage information acquisition, common values, and bidders who only approximately best-respond to the profile of others' strategies. A full version of the paper is available at
REF , borrowing from the language of finance, introduce the covered call value of a box, which is the minimum of the reservation value, and its true (random) value.