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An experimental analysis of auctions with interdependent valuations

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  • Kirchkamp, Oliver
  • Moldovanu, Benny

Abstract

We study experiments in an auction setting with interdependent valuation. Groups of three players receive private signals and then bid for a single, indivisible item. Valuations for the item differ within groups and depend asymmetrically on a bidder's own and other bidders' signals. Theoretically, the English auction yields efficient allocations, while other standard auction formats fail to do so. Consistent with equilibrium predictions, we find that an English auction yields significantly more efficiency than a second price sealed bid auction. We also study the seller's expected revenue and the bidders expected payoff, and find that the experimental results are close to the theoretical predictions. (JEL C92, D44)

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Bibliographic Info

Article provided by Elsevier in its journal Games and Economic Behavior.

Volume (Year): 48 (2004)
Issue (Month): 1 (July)
Pages: 54-85

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Handle: RePEc:eee:gamebe:v:48:y:2004:i:1:p:54-85

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Web page: http://www.elsevier.com/locate/inca/622836

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References

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  1. Amemiya, Takeshi, 1984. "Tobit models: A survey," Journal of Econometrics, Elsevier, vol. 24(1-2), pages 3-61.
  2. Coppinger, Vicki M & Smith, Vernon L & Titus, Jon A, 1980. "Incentives and Behavior in English, Dutch and Sealed-Bid Auctions," Economic Inquiry, Western Economic Association International, vol. 18(1), pages 1-22, January.
  3. Krishna, Vijay, 2003. "Asymmetric English auctions," Journal of Economic Theory, Elsevier, vol. 112(2), pages 261-288, October.
  4. Milgrom, Paul R & Weber, Robert J, 1982. "A Theory of Auctions and Competitive Bidding," Econometrica, Econometric Society, vol. 50(5), pages 1089-1122, September.
  5. repec:wop:humbsf:2000-72 is not listed on IDEAS
  6. Jehiel, Phillipe & Moldovanu, Benny, 1999. "Efficient Design with Interdependent Valuations," Sonderforschungsbereich 504 Publications 99-74, Sonderforschungsbereich 504, Universität Mannheim & Sonderforschungsbereich 504, University of Mannheim.
  7. Levin, Dan & Kagel, John H & Richard, Jean-Francois, 1996. "Revenue Effects and Information Processing in English Common Value Auctions," American Economic Review, American Economic Association, vol. 86(3), pages 442-60, June.
  8. William Vickrey, 1961. "Counterspeculation, Auctions, And Competitive Sealed Tenders," Journal of Finance, American Finance Association, vol. 16(1), pages 8-37, 03.
  9. Partha Dasgupta & Eric Maskin, 2000. "Efficient Auctions," The Quarterly Journal of Economics, MIT Press, vol. 115(2), pages 341-388, May.
  10. Fieseler, Karsten & Kittsteiner, Thomas & Moldovanu, Benny, 2003. "Partnerships, lemons, and efficient trade," Journal of Economic Theory, Elsevier, vol. 113(2), pages 223-234, December.
  11. Kagel, John H & Levin, Dan, 2001. "Behavior in Multi-unit Demand Auctions: Experiments with Uniform Price and Dynamic Vickrey Auctions," Econometrica, Econometric Society, vol. 69(2), pages 413-54, March.
  12. Kagel, John H & Harstad, Ronald M & Levin, Dan, 1987. "Information Impact and Allocation Rules in Auctions with Affiliated Private Values: A Laboratory Study," Econometrica, Econometric Society, vol. 55(6), pages 1275-1304, November.
  13. Amemiya, Takeshi, 1973. "Regression Analysis when the Dependent Variable is Truncated Normal," Econometrica, Econometric Society, vol. 41(6), pages 997-1016, November.
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Cited by:
  1. Jehiel, Philippe & Moldovanu, Benny, 2006. "Allocative and Informational Externalities in Auctions and Related Mechanisms," CEPR Discussion Papers 5558, C.E.P.R. Discussion Papers.
  2. Levin, Dan & Peck, James & Ye, Lixin, 2007. "Bad news can be good news: Early dropouts in an English auction with multi-dimensional signals," Economics Letters, Elsevier, vol. 95(3), pages 462-467, June.
  3. Jacob K. Goeree & Theo Offerman, 2000. "Efficiency in Auctions with Private and Common Values: An Experimental Study," Virginia Economics Online Papers 347, University of Virginia, Department of Economics.
  4. Oliver Kirchkamp, & Eva Poen, & Philipp Reiß, 2006. "Outside options: Another reason to choose the first-price auction," CRIEFF Discussion Papers 0605, Centre for Research into Industry, Enterprise, Finance and the Firm.
  5. Oleksii Birulin & Sergei Izmalkov, 2009. "On Effciency of the English Auction," Working Papers w0139, Center for Economic and Financial Research (CEFIR).
  6. Mun Chuia & David Porter & Stephen Rassenti & Vernon Smith, 2011. "The Effect of Bidding Information in Ascending Auctions," Working Papers 11-13, Chapman University, Economic Science Institute.
  7. Georganas, Sotiris & Nagel, Rosemarie, 2011. "Auctions with toeholds: An experimental study of company takeovers," International Journal of Industrial Organization, Elsevier, vol. 29(1), pages 34-45, January.

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