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Sorry Winners

Author

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  • Marco Pagnozzi

Abstract

Bidders who receive both "common-value'' and "private-value'' signals about the value of an auction prize cannot fully infer their opponents' information from the bidding, so may overestimate the value of the prize and, subsequently, regret winning. With multiple objects, prices in later auctions provide information relevant to earlier ones, and sequential auctions appear more vulnerable to overpayment and inefficiency than simultaneous auctions. However, aggregating across all auctions in a simple model, winners still earn positive profit ex-post. With information inequality among bidders, the seller's revenue is influenced by two competing effects. On the one hand, simultaneous auctions reduce the winner's curse of less informed bidders and allow them to bid more aggressively. On the other hand, sequential auctions induce less informed bidders to bid more aggressively in early auctions to acquire information.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Marco Pagnozzi, 2007. "Sorry Winners," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 30(3), pages 203-225, May.
    • Handle: RePEc:kap:revind:v:30:y:2007:i:3:p:203-225
    DOI: 10.1007/s11151-007-9133-0
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    Other versions of this item:

    • Marco Pagnozzi, 2003. "Sorry Winners," CSEF Working Papers 108, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy, revised 09 May 2007.

    Citations

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    Cited by:

    1. Ken Binmore & Paul Klemperer, 2002. "The Biggest Auction Ever: the Sale of the British 3G Telecom Licences," Economic Journal, Royal Economic Society, vol. 112(478), pages 74-96, March.
    2. Marco Pagnozzi, 2008. "Are Disadvanteged Bidders Doomed In Ascending Auctions?," Journal of Industrial Economics, Wiley Blackwell, vol. 56(3), pages 683-683, September.
    3. Hernando-Veciana, Ángel & Tröge, Michael, 2011. "The insider's curse," Games and Economic Behavior, Elsevier, vol. 71(2), pages 339-350, March.
    4. Ken Binmore & Paul Klemperer, 2002. "The Biggest Auction Ever: the Sale of the British 3G Telecom Licences," Economic Journal, Royal Economic Society, vol. 112(478), pages C74-C96, March.

    More about this item

    Keywords

    asymmetric bidders; auctions; overpayment; D44;
    All these keywords.

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions

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