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Comparative Static Effects of Number of Bidders and Public Information on Behavior in Second-Price Common Value Auctions

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Author Info

  • Kagel, John H
  • Levin, Dan
  • Harstad, Ronald M

Abstract

Comparative static tests of Nash bidding theory in second-price common value auctions show that bidders fail to respond in the right direction to more rivals and to public information concerning the value of the item. The former provides a clear indication that bidders fail to appreciate the adverse selection forces inherent in common value auctions, while the latter shows that policy prescriptions can fail given out-of-equilibrium behavior. These tests of Nash bidding theory apply to a far wider variety of circumstances than in first-price auctions, so there is less scope to rationalize the failure of the theory.

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Bibliographic Info

Article provided by Springer in its journal International Journal of Game Theory.

Volume (Year): 24 (1995)
Issue (Month): 3 ()
Pages: 293-319

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Handle: RePEc:spr:jogath:v:24:y:1995:i:3:p:293-319

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Cited by:
  1. Alan Mehlenbacher, 2007. "Multiagent System Simulations of Sealed-Bid Auctions with Two-Dimensional Value Signals," Department Discussion Papers 0707, Department of Economics, University of Victoria.
  2. John H. Kagel & Colin M. Campbell & Dan Levin, 1999. "The Winner's Curse and Public Information in Common Value Auctions: Reply," American Economic Review, American Economic Association, vol. 89(1), pages 325-334, March.
  3. Habib, Michel A. & Ziegler, Alexandre, 2007. "Why government bonds are sold by auction and corporate bonds by posted-price selling," Journal of Financial Intermediation, Elsevier, vol. 16(3), pages 343-367, July.
  4. Charness, Gary B & Levin, Dan, 2007. "The Origin of the Winner’s Curse: A Laboratory Study," University of California at Santa Barbara, Economics Working Paper Series qt8g88c6ww, Department of Economics, UC Santa Barbara.
  5. Gary Charness & Dan Levin, 2009. "The Origin of the Winner's Curse: A Laboratory Study," American Economic Journal: Microeconomics, American Economic Association, vol. 1(1), pages 207-36, February.
  6. Trauten, Andreas & Langer, Thomas, 2007. "Information production and bidding in IPOs: An experimental analysis of auctions and fixed-price offerings," Working Papers 50, Competence Center Internet Economy and Hybrid Systems, European Research Center for Information Systems (ERCIS), University of Münster.
  7. Axel Ockenfels & David Reiley & Abdolkarim Sadrieh, 2006. "Online Auctions," NBER Working Papers 12785, National Bureau of Economic Research, Inc.
  8. Ronald M. Harstad, 2005. "Rational Participation Revolutionizes Auction Theory," Working Papers 0504, Department of Economics, University of Missouri.
  9. Dakshina De Silva & Timothy Dunne & Anuruddha Kankanamge & Georgia Kosmopoulou, 2005. "The Impact of Public Information on Bidding in Highway Procurement Auctions," Microeconomics 0511011, EconWPA.
  10. Yaron Raviv, 2009. "Uncertainty and Auction Outcomes: Evidence from Used Car Actions," Review of Industrial Organization, Springer, vol. 34(4), pages 327-347, June.
  11. Ronald M Harstad, 2011. "Endogenous Competition Alters the Structure of Optimal Auctions," ISER Discussion Paper 0816, Institute of Social and Economic Research, Osaka University.
  12. Dickhaut, John & Ledyard, Margaret & Mukherji, Arijit & Sapra, Haresh, 2003. "Information management and valuation: an experimental investigation," Games and Economic Behavior, Elsevier, vol. 44(1), pages 26-53, July.
  13. Ahlberg, Joakim, 2012. "Multi-unit common value auctions: an experimental comparison between the static and the dynamic uniform auction," Working papers in Transport Economics 2012:24, CTS - Centre for Transport Studies Stockholm (KTH and VTI).

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