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

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Author Info
Robert Forsythe
R. Mark Isaac
Thomas R. Palfrey

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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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Publisher 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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  1. 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. [Downloadable!]
  2. 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. [Downloadable!]
    Other versions:
  3. 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. [Downloadable!]
  4. Thomas R. Palfrey, 2006. "The Compromise Game: Two-sided Adverse Selection in the Laboratory," IEPR Working Papers 06.60, Institute of Economic Policy Research (IEPR). [Downloadable!]
  5. Erik Eyster & Matthew Rabin, 2002. "Cursed Equilibrium," Department of Economics, Working Paper Series 1045, Department of Economics, Institute for Business and Economic Research, UC Berkeley. [Downloadable!]
  6. K. Goeree & 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. [Downloadable!]
    Other versions:
  7. Erik Eyster & Matt Rabin, 2003. "Cursed Equilibrium," Method and Hist of Econ Thought 0303002, EconWPA. [Downloadable!]
  8. Carrillo, Juan D. & Palfrey, Thomas R., 2006. "The compromise game: Two-sided adverse selection in the laboratory," Working Papers 1259, California Institute of Technology, Division of the Humanities and Social Sciences. [Downloadable!]
  9. 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. [Downloadable!]
  10. Boeheim, Rene & Zulehner, Christine, 1996. "Auctions - A Survey," Economics Series 39, Institute for Advanced Studies. [Downloadable!]
  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. [Downloadable!] (restricted)
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