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The Effect of Bidding Information in Ascending Auctions

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  • Mun Chuia

    ()
    (School of Economics and Smith's Center for Experimental Economics Research, Shanghai Jiao Tong University, China)

  • David Porter

    (Economic Science Institute, Chapman University)

  • Stephen Rassenti

    (Economic Science Institute, Chapman University)

  • Vernon Smith

    (Economic Science Institute, Chapman University)

Abstract

We study the effect of the drop out and reenter information in an environment where bidders' values involve both private and common value components. We find that (1) providing bidding information does not have a significant effect on expected revenue and expected efficiency. (2) The effect of information on winner's expected profit depends on the range of uncertainty of the common value component and the level of Nash profit prediction, which the auctioneer has no a priori knowledge. In our environment, where bidders have a private component to their value and the auction takes place in ascending clock format, (3) bidders do not suffer from the winner's curse when information is not provided. (4) Information substantially increases the variability of revenue and winner?s profit when the range of uncertainty of the common value component is large. (5) Bidders? response to information depends on the range of uncertainty.

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File URL: http://www.chapman.edu/ESI/wp/Porter-Rassenti-Smith_EffectofBiddingInformationAscendingAuctions.pdf
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Bibliographic Info

Paper provided by Chapman University, Economic Science Institute in its series Working Papers with number 11-13.

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Length: 45 pages
Date of creation: 2011
Date of revision:
Handle: RePEc:chu:wpaper:11-13

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  1. Kirchkamp, Oliver & Moldovanu, Benny, 2000. "An experimental analysis of auctions with interdependent valuations," Sonderforschungsbereich 504 Publications 00-10, Sonderforschungsbereich 504, Universit├Ąt Mannheim & Sonderforschungsbereich 504, University of Mannheim.
  2. Mikoucheva, Anna & Sonin, Konstantin, 2004. "Information revelation and efficiency in auctions," Economics Letters, Elsevier, vol. 83(3), pages 277-284, June.
  3. R. Preston McAfee & John McMillan, 1996. "Analyzing the Airwaves Auction," Journal of Economic Perspectives, American Economic Association, vol. 10(1), pages 159-175, Winter.
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