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An Experimental Study of Information Revelation Policies in Sequential Auctions

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  • Timothy N. Cason

    ()
    (Krannert School of Management, Purdue University, West Lafayette, Indiana 47907)

  • Karthik N. Kannan

    ()
    (Krannert School of Management, Purdue University, West Lafayette, Indiana 47907)

  • Ralph Siebert

    ()
    (Krannert School of Management, Purdue University, West Lafayette, Indiana 47907)

Abstract

Theoretical models of information asymmetry have identified a trade-off between the desire to learn and the desire to prevent an opponent from learning private information. This paper reports a laboratory experiment that investigates if actual bidders account for this trade-off, using a sequential procurement auction with private cost information and varying information revelation policies. Specifically, the Complete Information Revelation Policy, where all submitted bids are revealed between auctions, is compared to the Incomplete Information Revelation Policy, where only the winning bid is revealed. The experimental results are largely consistent with the theoretical predictions. For example, bidders pool with other types to prevent an opponent from learning significantly more often under a Complete Information Revelation Policy. Also as predicted, the procurer pays less when employing an Incomplete Information Revelation Policy only when the market is highly competitive. Bids are usually more aggressive than the risk-neutral quantitative prediction, which is broadly consistent with risk aversion. This paper was accepted by Teck Ho, decision analysis.

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File URL: http://dx.doi.org/10.1287/mnsc.1100.1301
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Bibliographic Info

Article provided by INFORMS in its journal Management Science.

Volume (Year): 57 (2011)
Issue (Month): 4 (April)
Pages: 667-688

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Handle: RePEc:inm:ormnsc:v:57:y:2011:i:4:p:667-688

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Keywords: complete and incomplete information revelation policies; laboratory study; procurement auction; multistage game;

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  1. Miguel A. Costa-Gomes & Georg Weizsäcker, 2004. "Stated Beliefs and Play in Normal-Form Games," ISER Discussion Paper 0614, Institute of Social and Economic Research, Osaka University.
  2. Richard Engelbrecht-Wiggans & Elena Katok, 2008. "Regret and Feedback Information in First-Price Sealed-Bid Auctions," Management Science, INFORMS, vol. 54(4), pages 808-819, April.
  3. De Silva, Dakshina G. & Dunne, Timothy & Kankanamge, Anuruddha & Kosmopoulou, Georgia, 2008. "The impact of public information on bidding in highway procurement auctions," European Economic Review, Elsevier, vol. 52(1), pages 150-181, January.
  4. Miguel A. Costa-Gomes & Georg Weizs�cker, 2008. "Stated Beliefs and Play in Normal-Form Games," Review of Economic Studies, Oxford University Press, vol. 75(3), pages 729-762.
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Cited by:
  1. Naoko Nishimura & Timothy N. Cason & Tatsuyoshi Saijo & Yoshikazu Ikeda, 2011. "Spite and Reciprocity in Auctions," Games, MDPI, Open Access Journal, vol. 2(3), pages 365-411, September.

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