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Efficiency in Auctions with Private and Common Values: An Experimental Study

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  • Jacob K. Goeree

    ()
    (California Institute of Technology)

  • Theo Offerman

    ()
    (CREED, University of Amsterdam)

Abstract

Auctions are generally not efficient when the object's expected value depends on private and common value information. We report a series of first-price auction experiments to measure the degree of inefficiency that occurs with financially motivated bidders. While some subjects fall prey to the winner's curse, they weigh their private and common value information in roughly the same manner as rational bidders, with observed efficiencies close to predicted levels. Increased competition and reduced uncertainty about the common value positively affect revenues and efficiency. The public release of information about the common value also raises efficiency, although less than predicted. This discussion has resulted in a publication in the American Economic Review , 2002, 92(3), 625-43.

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Paper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 00-045/1.

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Date of creation: 06 Jun 2000
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Handle: RePEc:dgr:uvatin:20000045

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