An Ascending Auction in the Presence of Rationality and Herd Behaviour
AbstractIn this paper we analyse a common value English auction. We argue that rational bidders attempt to estimate each other’s private signals, to take advantage of the additional information disclosed through the bids. If this happens, herd behaviour might arise, because a particular bidder may have an incentive to follow his estimate of some other bidder’s signal, thus dropping his own, and staying in the auction longer than previously optimal. Acting upon beliefs might take the auction to an inefficient outcome, where the bidder who most values the good ends up not getting the object for sale.
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Bibliographic InfoPaper provided by Department of Economics, University of York in its series Discussion Papers with number 99/8.
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Postal: Department of Economics and Related Studies, University of York, York, YO10 5DD, United Kingdom
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More information through EDIRC
English Auctions; Rationality; Herd Behaviour;
Find related papers by JEL classification:
- D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
This paper has been announced in the following NEP Reports:
- NEP-ALL-1999-05-17 (All new papers)
- NEP-IND-1999-05-17 (Industrial Organization)
- NEP-MIC-1999-05-17 (Microeconomics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Paul Milgrom & Robert J. Weber, 1981.
"A Theory of Auctions and Competitive Bidding,"
447R, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Christopher Avery & John H. Kagel, 1997. "Second-Price Auctions with Asymmetric Payoffs: An Experimental Investigation," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 6(3), pages 573-603, 09.
- McAfee, R Preston & McMillan, John, 1987. "Auctions and Bidding," Journal of Economic Literature, American Economic Association, vol. 25(2), pages 699-738, June.
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