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Theories and Tests of "Blind Bidding" in Sealed-Bid Auctions

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  • Robert Forsythe
  • R. Mark Isaac
  • Thomas R. Palfrey

Abstract

In this article we report the results from a series of laboratory markets in which sellers have better information about the quality of an item than any of the potential buyers. Sellers may voluntarily choose to reveal this information or they may instead decide to "blind bid" the item. We find that a sequential equilibrium model where buyers "assume the worst" is a good predictor of behavior in these simple markets. This equilibrium is not instantaneously attained, however, but there is an unravelling process which describes how this equilibrium is approached. At the conclusion of the market, allocations tend to be fully efficient, ex post.

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Bibliographic Info

Article provided by The RAND Corporation in its journal RAND Journal of Economics.

Volume (Year): 20 (1989)
Issue (Month): 2 (Summer)
Pages: 214-238

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Handle: RePEc:rje:randje:v:20:y:1989:i:summer:p:214-238

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Cited by:
  1. Boeheim, Rene & Zulehner, Christine, 1996. "Auctions - A Survey," Economics Series 39, Institute for Advanced Studies.
  2. Juan D. Carrillo & Thomas R. Palfrey, 2007. "The Compromise Game: Two-sided Adverse Selection in the Laboratory," Levine's Bibliography 321307000000000754, UCLA Department of Economics.
  3. Jacob K. Goeree & Theo Offerman, 2000. "Efficiency in Auctions with Private and Common Values: An Experimental Study," Tinbergen Institute Discussion Papers 00-045/1, Tinbergen Institute.
  4. Eyster, Erik & Rabin, Matt, 2002. "Cursed Equilibrium," Department of Economics, Working Paper Series qt6xf4782t, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
  5. Lucy F. Ackert & Bryan K. Church & Mandira Roy Sankar, 1998. "Voluntary disclosure under imperfect competition: Experimental evidence," Working Paper 98-7, Federal Reserve Bank of Atlanta.
  6. Juan D Carrillo & Thomas R Palfrey, 2007. "The Compromise Game: Two-Sided Adverse Selection in the Laboratory," Levine's Bibliography 122247000000001463, UCLA Department of Economics.
  7. Volker Benndorf & Dorothea Kübler & Hans-Theo Normann, 2013. "Privacy Concerns, Voluntary Disclosure of Information, and Unraveling: An Experiment," SFB 649 Discussion Papers SFB649DP2013-040, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
  8. James G. Mulligan & Daniel J. Wedzielewski, 2012. "Government Intervention to Prevent Bankruptcy: the Effect of Blind-Bidding Laws on Movie Theaters," Working Papers 12-03, University of Delaware, Department of Economics.
  9. Brocas, Isabelle & Carrillo, Juan D & Palfrey, Thomas R, 2009. "Information Gatekeepers: Theory and Experimental Evidence," CEPR Discussion Papers 7457, C.E.P.R. Discussion Papers.
  10. David Porter & Roumen Vragov, 2006. "An experimental examination of demand reduction in multi-unit versions of the Uniform-price, Vickrey, and English auctions," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 27(6), pages 445-458.
  11. Carrillo, Juan D & Palfrey, Thomas R, 2007. "The Compromise Game: Two-sided Adverse Selection in the Laboratory," CEPR Discussion Papers 6103, C.E.P.R. Discussion Papers.

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