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Bidder Behavior in a Common Value Simultaneous Ascending Auction

Author

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  • Griffin, Robert
  • Anderson, Christopher

Abstract

We develop and experimentally test a model of bidder behavior in a simultaneous ascending auction for heterogeneous common value goods. The model follows the "straightforward" strategy developed by Milgrom (2000) while accounting for the adverse selection effect and the potential for the winner's curse. When this model is evaluated against laboratory results, we find that bidders deviate from the predicted price path as we observe extensive jump bidding and lower final prices than predicted. We observe that jump bidding generally increases prices and decreases earnings, suggesting that jump bids are based on bidder impatience rather than strategic motivations. Despite the failure of the model to predict bidder behavior, it does offer significant predictive power regarding the final allocation of goods and avoidance of the winner's curse.

Suggested Citation

  • Griffin, Robert & Anderson, Christopher, 2015. "Bidder Behavior in a Common Value Simultaneous Ascending Auction," Strategic Behavior and the Environment, now publishers, vol. 5(3-4), pages 215-253, December.
    • Handle: RePEc:now:jnlsbe:102.00000061
    DOI: 10.1561/102.00000061
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    More about this item

    Keywords

    Simultaneous ascending auction; Common value; Experiment; Energy;
    All these keywords.

    JEL classification:

    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • C38 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Classification Methdos; Cluster Analysis; Principal Components; Factor Analysis
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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