This paper revisits recent empirical research on buyer credulity in arts auctions and auctions for assets in general. We show that elementary results in auction theory can fully account for some stylized facts on asset returns that have been held to suggest that sellers of assets can exploit buyers by providing biased estimates of asset values. We argue that, rather than showing that buyers are credulous, the existing evidence can serve as an indirect test of the rationality assumptions underlying auction theory.
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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number
6503.
Alex Gershkov & Flavio Toxvaerd, 2006.
"On Seller Estimates And Buyer Returns,"
Discussion Papers
143, SFB/TR 15 Governance and the Efficiency of Economic Systems, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
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Find related papers by JEL classification: D44 - Microeconomics - - Market Structure and Pricing - - - Auctions D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information G12 - Financial Economics - - General Financial Markets - - - Asset Pricing G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies
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