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Revenue Effects and Information Processing in English Common Value Auctions

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  • Levin, Dan
  • Kagel, John H
  • Richard, Jean-Francois

Abstract

An experiment analyzing behavior in English common value auctions is reported. English auctions raise more revenue than first-price auctions only when bidders do not suffer from a strong winner's curse. Agents employ other bidders' dropout prices along with their private information as Nash bidding theory predicts. However, a simple and natural signal-averaging rule, which does not require recognizing the adverse-selection effect of winning the auction, better characterizes the data than the Nash rule. Monte Carlo simulations using FIML estimates of the signal-averaging rule predict a number of data characteristics not directly employed in the estimation procedure. Copyright 1996 by American Economic Association.

Suggested Citation

  • Levin, Dan & Kagel, John H & Richard, Jean-Francois, 1996. "Revenue Effects and Information Processing in English Common Value Auctions," American Economic Review, American Economic Association, vol. 86(3), pages 442-460, June.
  • Handle: RePEc:aea:aecrev:v:86:y:1996:i:3:p:442-60
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