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On the effects of joint bidding in independent private value auctions: An experimental study

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  • Chernomaz, Kirill
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    Abstract

    This article explores the effect of a subset of symmetric bidders joining to bid together. Possible applications include mergers, collusion and joint-bidding arrangements. The change produces a “strong” party with a more advantageous value distribution than the remaining “weak” bidder(s). The predicted effects include inefficiency, a decrease in the sellerʼs revenue, and higher biddersʼ payoffs. Under risk neutrality, the members of the strong party benefit less than the weak bidders. The prediction is reversed when the bidders are sufficiently risk-averse. These hypotheses are tested experimentally. Contrary to the theory, joint bidding increases efficiency and the sellerʼs revenue decreases by less than expected. Strong bidders benefit more than weak bidders indicating that incentives to bid jointly may be greater than hypothesized. Additionally, the experiment assesses the effect of group decision-making. A Nash equilibrium prediction for individual–group differences based on differences in risk attitudes is not supported by the data.

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    Bibliographic Info

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

    Volume (Year): 76 (2012)
    Issue (Month): 2 ()
    Pages: 690-710

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    Handle: RePEc:eee:gamebe:v:76:y:2012:i:2:p:690-710

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

    Related research

    Keywords: Asymmetric auctions; Independent private value; First-price auctions; Experimental economics; Group decision-making; Joint bidding; Mergers;

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    Cited by:
    1. Daniel Rondeau & Pascal Courty & Maurice Doyon, 2013. "Simultaneous Allocation of Bundled Goods Through Auctions: Assessing the Case for Joint Bidding," CIRANO Working Papers 2013s-37, CIRANO.
    2. Kirill Chernomaz, 2014. "Adaptive learning in an asymmetric auction: genetic algorithm approach," Journal of Economic Interaction and Coordination, Springer, vol. 9(1), pages 27-51, April.

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