Strategic Implications of Uncertainty over One's Own Private Value in Auctions

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Strategic Implications of Uncertainty over One's Own Private Value in Auctions

Author Info

Eric Rasmusen (Indiana University, Kelley School of Business)

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Eric B Rasmusen

Abstract

A rational bidder in a private-value auction should be reluctant to incur the cost of perfectly estimating his value if it might not matter to the success of his bidding strategy. This can explain sniping---flurries of bids at the end of auctions---as the result of other bidders trying to avoid stimulating the victim into learning more about his value. The idea of value discovery also explains why a bidder might increase his bid ceiling in the course of an auction and why he would like to know the private values of other bidders.

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Publisher Info
Article provided by Berkeley Electronic Press in its journal Advances in Theoretical Economics.

Volume (Year): 6 (2006)
Issue (Month): 1 ()
Pages: 1261-1261
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Handle: RePEc:bep:theadv:v:6:y:2006:i:1:p:1261-1261

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Paper
- Eric Rasmusen, 2004. "Strategic Implications of Uncertainty Over One’s Own Private Value in Auctions," Working Papers 2004-13, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy. [Downloadable!]
- Eric B. Rasmusen, 2001. "Starategic Implications of Uncertainty Over One's Own Private Value in Auctions," CIRJE F-Series CIRJE-F-127, CIRJE, Faculty of Economics, University of Tokyo. [Downloadable!]

Find related papers by JEL classification:
D44 - Microeconomics - - Market Structure and Pricing - - - Auctions

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

Charles D. Kolstad Rolando M. Guzman, . "Auction Equilibrium with Costly Information Acquisition," University of California Santa Barbara - Department of Economics 17-97, California Santa Barbara - Department of Economics. [Downloadable!]
Eric Rasmusen, 2007. "Getting Carried Away in Auctions as Imperfect Value Discovery," Working Papers 2007-05, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy. [Downloadable!]
Other versions:
- Eric Rasmusen, 2004. "Getting Carried Away in Auctions as Imperfect Value Discovery," Industrial Organization 0409001, EconWPA. [Downloadable!]
Janssen, Maarten & Rasmusen, Eric, 2002. "Bertrand Competition under Uncertainty," Journal of Industrial Economics, Blackwell Publishing, vol. 50(1), pages 11-21, March. [Downloadable!] (restricted)
Other versions:
- Maarten Janssen & Eric Rasmusen, 2001. "Bertrand Competition Under Uncertainty," CIRJE F-Series CIRJE-F-117, CIRJE, Faculty of Economics, University of Tokyo. [Downloadable!]
- Maarten Janssen & Eric Rasmusen, 2000. "Bertrand Competition Under Uncertainty," Econometric Society World Congress 2000 Contributed Papers 1309, Econometric Society. [Downloadable!]
- Eric Rasmusen, 1996. "Bertrand Competition Under Uncertainty," Industrial Organization 9607002, EconWPA. [Downloadable!]
- Maarten C.W. Janssen & Eric Rasmusen, 1998. "Bertrand Competition under Uncertainty," Tinbergen Institute Discussion Papers 98-083/1, Tinbergen Institute. [Downloadable!]
McAfee, R. Preston & McMillan, John, 1987. "Auctions with a stochastic number of bidders," Journal of Economic Theory, Elsevier, vol. 43(1), pages 1-19, October. [Downloadable!] (restricted)
Eric Rasmusen, 2001. "Explaining Incomplete Contracts as the Result of Contract-Reading Costs," Advances in Economic Analysis & Policy, Berkeley Electronic Press, vol. 1(advances/), pages 1000-1000. [Downloadable!] (restricted)
Levin, Dan & Smith, James L, 1994. "Equilibrium in Auctions with Entry," American Economic Review, American Economic Association, vol. 84(3), pages 585-99, June. [Downloadable!] (restricted)
Olivier Compte & Philippe Jehiel, 2005. "Auctions and Information acquisition: Sealed-bid or Dynamic Formats?," Levine's Bibliography 784828000000000495, UCLA Department of Economics. [Downloadable!]
Lixin Ye, 2004. "Optimal Auctions with Endogenous Entry," Contributions to Theoretical Economics, Berkeley Electronic Press, vol. 4(1), pages 1158-1158. [Downloadable!] (restricted)
Burdett, Kenneth & Judd, Kenneth L, 1983. "Equilibrium Price Dispersion," Econometrica, Econometric Society, vol. 51(4), pages 955-69, July. [Downloadable!] (restricted)
Hausch, Donald B & Li, Lode, 1993. "A Common Value Auction Model with Endogenous Entry and Information Acquisition," Economic Theory, Springer, vol. 3(2), pages 315-34, April.
Nicola Persico, 2000. "Information Acquisition in Auctions," Econometrica, Econometric Society, vol. 68(1), pages 135-148, January.
Other versions:
- Nicola Persico, 1997. "Information Acquisition in Auctions," UCLA Economics Working Papers 762, UCLA Department of Economics. [Downloadable!]
Bajari, Patrick & Hortacsu, Ali, 2003. " The Winner's Curse, Reserve Prices, and Endogenous Entry: Empirical Insights from eBay Auctions," RAND Journal of Economics, The RAND Corporation, vol. 34(2), pages 329-55, Summer.
Olivier Compte & Philippe Jehiel, 2004. "The Wait-and-See Option in Ascending Price Auctions," Journal of the European Economic Association, MIT Press, vol. 2(2-3), pages 494-503, 04/05. [Downloadable!] (restricted)
Michael J. Fishman, 1988. "A Theory of Preemptive Takeover Bidding," RAND Journal of Economics, The RAND Corporation, vol. 19(1), pages 88-101, Spring. [Downloadable!] (restricted)
Patrick Bajari & Ali Hortacsu, 2000. "Winner's Curse, Reserve Prices and Endogenous Entry: Empirical Insights from eBay Auctions," Econometric Society World Congress 2000 Contributed Papers 1927, Econometric Society. [Downloadable!]
David Hirshleifer, 1989. "Facilitation of Competing Bids and the Price of a Takeover Target," University of California at Los Angeles, Anderson Graduate School of Management 1193, Anderson Graduate School of Management, UCLA. [Downloadable!]
Milgrom, Paul R & Weber, Robert J, 1982. "A Theory of Auctions and Competitive Bidding," Econometrica, Econometric Society, vol. 50(5), pages 1089-1122, September. [Downloadable!] (restricted)
Other versions:
- Paul Milgrom & Robert J. Weber, 1981. "A Theory of Auctions and Competitive Bidding," Discussion Papers 447R, Northwestern University, Center for Mathematical Studies in Economics and Management Science. [Downloadable!]
Engelbrecht-Wiggans, Richard, 2001. "The effect of entry and information costs on oral versus sealed-bid auctions," Economics Letters, Elsevier, vol. 70(2), pages 195-202, February. [Downloadable!] (restricted)

Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

Eric Rasmusen, 2007. "Getting Carried Away in Auctions as Imperfect Value Discovery," Working Papers 2007-05, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy. [Downloadable!]
Other versions:
- Eric Rasmusen, 2004. "Getting Carried Away in Auctions as Imperfect Value Discovery," Industrial Organization 0409001, EconWPA. [Downloadable!]
Cotton, Christopher, 2007. "Multiple-bidding in auctions as bidders become confident of their private valuations," MPRA Paper 1844, University Library of Munich, Germany. [Downloadable!]
Sascha Füllbrunn, 2007. "Collusion or Sniping in simultaneous ascending Auctions," FEMM Working Papers 07025, Otto-von-Guericke University Magdeburg, Faculty of Economics and Management. [Downloadable!]
Dan Ariely & Axel Ockenfels & Alvin E. Roth, 2003. "An Experimental Analysis of Ending Rules in Internet Auctions," CESifo Working Paper Series CESifo Working Paper No. , CESifo GmbH. [Downloadable!]
Other versions:
- Dan Ariely & Axel Ockenfels & Alvin E. Roth, 2002. "An Experimental Analysis of Ending Rules in Internet Auctions," Discussion Papers on Strategic Interaction 2002-47, Max Planck Institute of Economics, Strategic Interaction Group. [Downloadable!]
- Dan Ariely & Axel Ockenfels & Alvin E Roth, 2003. "An Experimental Analysis of Ending Rules in Internet Auctions," Levine's Bibliography 506439000000000433, UCLA Department of Economics. [Downloadable!]
- Dan Ariely & Axel Ockenfels & Alvin E. Roth, 2005. "An Experimental Analysis of Ending Rules in Internet Auctions," RAND Journal of Economics, The RAND Corporation, vol. 36(4), pages 890-907, Winter.

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