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Strategic Implications of Uncertainty over One's Own Private Value in Auctions

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  • Rasmusen Eric Bennett

    (Indiana University, Kelley School of Business)

Abstract

A rational bidder in a private-value auction should be reluctant to incur the cost of perfectly estimating his value if it might not matter to the success of his bidding strategy. This can explain sniping---flurries of bids at the end of auctions---as the result of other bidders trying to avoid stimulating the victim into learning more about his value. The idea of value discovery also explains why a bidder might increase his bid ceiling in the course of an auction and why he would like to know the private values of other bidders.

Suggested Citation

  • Rasmusen Eric Bennett, 2006. "Strategic Implications of Uncertainty over One's Own Private Value in Auctions," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 6(1), pages 1-24, November.
    • Handle: RePEc:bpj:bejtec:v:advances.6:y:2006:i:1:n:7
    DOI: 10.2202/1534-5963.1261
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    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions

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