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Multiagent System Simulations of Sealed-Bid Auctions with Two-Dimensional Value Signals

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    Abstract

    This study uses a multiagent system to investigate how sealed-bid auction results vary across twodimensional value signals from pure private to pure common value. I find that several auction outcomes are significantly nonlinear across the two-dimensional value signals. As the common value percent increases, profit, revenue, and efficiency all decrease monotonically, but they decrease in different ways. Finally, I find that forcing revelation by the auction winner of the true common value may have beneficial revenue effects when the common-value percent is high and there is a high degree of uncertainty about the common value.

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    File URL: http://www.uvic.ca/socialsciences/economics/assets/docs/discussion/ddp0707.pdf
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    Bibliographic Info

    Paper provided by Department of Economics, University of Victoria in its series Department Discussion Papers with number 0707.

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    Length: 51 pages
    Date of creation: 19 Nov 2007
    Date of revision:
    Handle: RePEc:vic:vicddp:0707

    Note: ISSN 1914-2838
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    Postal: PO Box 1700, STN CSC, Victoria, BC, Canada, V8W 2Y2
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    Web page: http://web.uvic.ca/econ
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    Related research

    Keywords: Axiomatic bargaining; resource monotonicity; transferable utility; risk aversion;

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    1. Tesfatsion, Leigh & Judd, Kenneth L., 2006. "Handbook of Computational Economics, Vol. 2: Agent-Based Computational Economics," Staff General Research Papers 10368, Iowa State University, Department of Economics.
    2. Kenneth Hendricks & Joris Pinkse & Robert H. Porter, 2001. "Empirical Implications of Equilibrium Bidding in First-Price, Symmetric, Common Value Auctions," NBER Working Papers 8294, National Bureau of Economic Research, Inc.
    3. Partha Dasgupta & Eric Maskin, 2000. "Efficient Auctions," The Quarterly Journal of Economics, MIT Press, vol. 115(2), pages 341-388, May.
    4. Philip A. Haile & Han Hong & Matthew Shum, 2003. "Nonparametric Tests for Common Values in First-Price Sealed-Bid Auctions," Cowles Foundation Discussion Papers 1445, Cowles Foundation for Research in Economics, Yale University.
    5. Camerer, Colin F. & Ho, Teck-Hua & Chong, Juin-Kuan, 2002. "Sophisticated Experience-Weighted Attraction Learning and Strategic Teaching in Repeated Games," Journal of Economic Theory, Elsevier, vol. 104(1), pages 137-188, May.
    6. Jehiel, Philippe & Moldovanu, Benny, 2001. "Efficient Design with Interdependent Valuations," Econometrica, Econometric Society, vol. 69(5), pages 1237-59, September.
    7. Selten, Reinhard & Joachim Buchta, 1994. "Experimental Sealed Bid First Price Auctions with Directly Observed Bid Functions," Discussion Paper Serie B 270, University of Bonn, Germany.
    8. Matt Shum & Phil Haile & Han Hong, 2003. "Nonparametric Tests for Common Values in First-Price Auctions," Economics Working Paper Archive 501, The Johns Hopkins University,Department of Economics.
    9. Kagel, John H & Levin, Dan & Harstad, Ronald M, 1995. "Comparative Static Effects of Number of Bidders and Public Information on Behavior in Second-Price Common Value Auctions," International Journal of Game Theory, Springer, vol. 24(3), pages 293-319.
    10. repec:rus:hseeco:215327 is not listed on IDEAS
    11. Reinhard Selten & Klaus Abbink & Ricarda Cox, 2005. "Learning Direction Theory and the Winner’s Curse," Experimental Economics, Springer, vol. 8(1), pages 5-20, April.
    12. Axel Ockenfels & Reinhard Selten, 2004. "Impulse Balance Equilibrium and Feedback in First Price Auctions," Working Paper Series in Economics 7, University of Cologne, Department of Economics.
    13. Athey,S. & Haile,P.A., 2000. "Identification of standard auction models," Working papers 13, Wisconsin Madison - Social Systems.
    14. Selten, Reinhard, . "Features of Experimentally Observed Bounded Rationality," Discussion Paper Serie B 421, University of Bonn, Germany, revised Nov 1997.
    15. repec:wop:humbsf:2000-72 is not listed on IDEAS
    16. Garvin, Susan & Kagel, John H., 1994. "Learning in common value auctions: Some initial observations," Journal of Economic Behavior & Organization, Elsevier, vol. 25(3), pages 351-372, December.
    17. Neugebauer, Tibor & Selten, Reinhard, 2006. "Individual behavior of first-price auctions: The importance of information feedback in computerized experimental markets," Games and Economic Behavior, Elsevier, vol. 54(1), pages 183-204, January.
    18. Leigh Tesfatsion, 2002. "Agent-Based Computational Economics," Computational Economics 0203001, EconWPA, revised 15 Aug 2002.
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    Cited by:
    1. Alan Mehlenbacher, 2007. "Multiagent System Platform for Auction Simulations," Department Discussion Papers 0706, Department of Economics, University of Victoria.
    2. Alan Mehlenbacher, 2007. "Multiagent System Simulations of Treasury Auctions," Department Discussion Papers 0709, Department of Economics, University of Victoria.
    3. Alan Mehlenbacher, 2007. "Multiagent System Simulations of Signal Averaging in English Auctions with Two-Dimensional Value Signals," Department Discussion Papers 0708, Department of Economics, University of Victoria.

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