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Impact of Valuation Ranking Information on Bidding in First-Price

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  • A. Alexander Elbittar

    (CIDE)

Abstract

Landberger et al. (2001) identified optimal bidder behavior in first- price private-value auctions when the ranking of valuations is common knowledge, and derived comparative-statics predictions regarding the auctioneer’s expected revenue and the efficiency of the allocation. The experiment reported here tests the behavioral components of these comparative-statics predictions. The results support the prediction that buyers are inclined to bid more aggressively when they learn they have the low value. Contrary to the theory, buyers are inclined to bid less when they learn they have the high value. Consistent with theory, the overall proportion of efficient allocations is lower than in the first- price auction before information is revealed. But as a result of high- value bidders decreasing their bids, the expected revenue does not increase on a regular basis, contrary to the theory’s predictions.

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Bibliographic Info

Paper provided by EconWPA in its series Microeconomics with number 0508008.

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Length: 33 pages
Date of creation: 22 Aug 2005
Date of revision:
Handle: RePEc:wpa:wuwpmi:0508008

Note: Type of Document - pdf; prepared on Win98; pages: 33
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Web page: http://128.118.178.162

Related research

Keywords: Asymmetric auctions; laboratory experiments; affiliation and economics of information;

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References

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  1. Jacob Rubinstein & Elmar Wolfstetter & Michael Landsberger & Shmuel Zamir, 2001. "First-price auctions when the ranking of valuations is common knowledge," Review of Economic Design, Springer, vol. 6(3), pages 461-480.
  2. Wolfstetter,Elmar, 2000. "Topics in Microeconomics," Cambridge Books, Cambridge University Press, number 9780521645348, April.
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