Common Value Auctions with Insider Information
Bidding is studied in first-price common value auctions where an insider is better informed than other bidders (outsiders). As in symmetric information structure (SIS) auctions, inexperienced outsiders suffer from a strong winner's curse. Super-experienced bidders, who have largely overcome the winner's curse, satisfy the comparative static predictions of the theory (i) An insider increases average seller's revenue compared to SIS auctions, (ii) insiders make substantially greater profits than outsiders, and (iii) more rivals cause insiders to bid higher. Changes in insiders' bids are consistent with directional learning theory (Selten and Buchta, 1994).
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Volume (Year): 67 (1999)
Issue (Month): 5 (September)
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