IDEAS home Printed from https://ideas.repec.org/a/rje/randje/v20y1989isummerp214-238.html
   My bibliography  Save this article

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

Author

Listed:
  • 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.

Suggested Citation

  • Robert Forsythe & R. Mark Isaac & Thomas R. Palfrey, 1989. "Theories and Tests of "Blind Bidding" in Sealed-Bid Auctions," RAND Journal of Economics, The RAND Corporation, vol. 20(2), pages 214-238, Summer.
    • Handle: RePEc:rje:randje:v:20:y:1989:i:summer:p:214-238
    as

    Download full text from publisher

    File URL: http://links.jstor.org/sici?sici=0741-6261%28198922%2920%3A2%3C214%3ATATO%22B%3E2.0.CO%3B2-F&origin=repec
    File Function: full text
    Download Restriction: Access to full text is restricted to JSTOR subscribers. See http://www.jstor.org for details.
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Boeheim, Rene & Zulehner, Christine, 1996. "Auctions - A Survey," Economics Series 39, Institute for Advanced Studies.
    2. Hagenbach, Jeanne & Perez-Richet, Eduardo, 2018. "Communication with evidence in the lab," Games and Economic Behavior, Elsevier, vol. 112(C), pages 139-165.
    3. 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.
    4. King, Ronald R. & Wallin, David E., 1995. "Experimental tests of disclosure with an opponent," Journal of Accounting and Economics, Elsevier, vol. 19(1), pages 139-167, February.
    5. Ackert, Lucy F. & Church, Bryan K. & Sankar, Mandira Roy, 2000. "Voluntary disclosure under imperfect competition: experimental evidence," International Journal of Industrial Organization, Elsevier, vol. 18(1), pages 81-105, January.
    6. Kamei, Kenju, 2020. "Voluntary disclosure of information and cooperation in simultaneous-move economic interactions," Journal of Economic Behavior & Organization, Elsevier, vol. 171(C), pages 234-246.
    7. Isabelle Brocas & Juan Carrillo & Thomas Palfrey, 2012. "Information gatekeepers: theory and experimental evidence," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 51(3), pages 649-676, November.
    8. Ginger Zhe Jin & Michael Luca & Daniel Martin, 2021. "Is No News (Perceived As) Bad News? An Experimental Investigation of Information Disclosure," American Economic Journal: Microeconomics, American Economic Association, vol. 13(2), pages 141-173, May.
    9. Benndorf, Volker & Kübler, Dorothea & Normann, Hans-Theo, 2015. "Privacy concerns, voluntary disclosure of information, and unraveling: An experiment," European Economic Review, Elsevier, vol. 75(C), pages 43-59.
    10. Erik Eyster & Matthew Rabin, 2005. "Cursed Equilibrium," Econometrica, Econometric Society, vol. 73(5), pages 1623-1672, September.
    11. Juan D. Carrillo & Thomas R. Palfrey, 2009. "The Compromise Game: Two-Sided Adverse Selection in the Laboratory," American Economic Journal: Microeconomics, American Economic Association, vol. 1(1), pages 151-181, February.
    12. Li, Ying Xue & Schipper, Burkhard C., 2020. "Strategic reasoning in persuasion games: An experiment," Games and Economic Behavior, Elsevier, vol. 121(C), pages 329-367.
    13. Nichole Szembrot, 2018. "Experimental study of cursed equilibrium in a signaling game," Experimental Economics, Springer;Economic Science Association, vol. 21(2), pages 257-291, June.
    14. Theo Offerman, 2002. "Efficiency in Auctions with Private and Common Values: An Experimental Study," American Economic Review, American Economic Association, vol. 92(3), pages 625-643, June.
    15. Tom Lane & Minghai Zhou, 2022. "Failure of unravelling theory? A natural field experiment on voluntary quality disclosure," Discussion Papers 2022-17, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham.
    16. Volker Benndorf, 2018. "Voluntary Disclosure of Private Information and Unraveling in the Market for Lemons: An Experiment," Games, MDPI, vol. 9(2), pages 1-17, May.
    17. 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.
    18. Burkhard Schipper & Ying Xue Li, 2018. "Strategic Reasoning in Persuasion Games: An Experiment," Working Papers 181, University of California, Davis, Department of Economics.
    19. Cornago, Elisabetta & Dressler, Luisa, 2020. "Incentives to (not) disclose energy performance information in the housing market," Resource and Energy Economics, Elsevier, vol. 61(C).
    20. Ronald R. King & David E. Wallin, 1990. "The effects of antifraud rules and ex post verifiability on managerial disclosures," Contemporary Accounting Research, John Wiley & Sons, vol. 6(2), pages 859-892, March.
    21. Ertac, Seda & Koçkesen, Levent & Ozdemir, Duygu, 2016. "The role of verifiability and privacy in the strategic provision of performance feedback: Theory and experimental evidence," Games and Economic Behavior, Elsevier, vol. 100(C), pages 24-45.
    22. Ertac, Seda & Gümren, Mert & Koçkesen, Levent, 2019. "Strategic feedback in teams: Theory and experimental evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 162(C), pages 1-23.
    23. Guillaume R. Fréchette & Alessandro Lizzeri & Jacopo Perego, 2022. "Rules and Commitment in Communication: An Experimental Analysis," Econometrica, Econometric Society, vol. 90(5), pages 2283-2318, September.
    24. Theodore L. Turocy & Timothy N. Cason, 2015. "Bidding in first-price and second-price interdependent-values auctions: A laboratory experiment," Working Paper series, University of East Anglia, Centre for Behavioural and Experimental Social Science (CBESS) 15-23, School of Economics, University of East Anglia, Norwich, UK..
    25. Vollstaedt, Ulrike & Imcke, Patrick & Brendel, Franziska & Ehses-Friedrich, Christiane, 2020. "Increasing consumer surplus through a novel product testing mechanism," Ruhr Economic Papers 887, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:rje:randje:v:20:y:1989:i:summer:p:214-238. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://www.rje.org .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.