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An Experimental Study of Information Revelation Policies in Sequential Auctions

  • Timothy N. Cason


    (Krannert School of Management, Purdue University, West Lafayette, Indiana 47907)

  • Karthik N. Kannan


    (Krannert School of Management, Purdue University, West Lafayette, Indiana 47907)

  • Ralph Siebert


    (Krannert School of Management, Purdue University, West Lafayette, Indiana 47907)

Theoretical models of information asymmetry have identified a trade-off between the desire to learn and the desire to prevent an opponent from learning private information. This paper reports a laboratory experiment that investigates if actual bidders account for this trade-off, using a sequential procurement auction with private cost information and varying information revelation policies. Specifically, the Complete Information Revelation Policy, where all submitted bids are revealed between auctions, is compared to the Incomplete Information Revelation Policy, where only the winning bid is revealed. The experimental results are largely consistent with the theoretical predictions. For example, bidders pool with other types to prevent an opponent from learning significantly more often under a Complete Information Revelation Policy. Also as predicted, the procurer pays less when employing an Incomplete Information Revelation Policy only when the market is highly competitive. Bids are usually more aggressive than the risk-neutral quantitative prediction, which is broadly consistent with risk aversion. This paper was accepted by Teck Ho, decision analysis.

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Article provided by INFORMS in its journal Management Science.

Volume (Year): 57 (2011)
Issue (Month): 4 (April)
Pages: 667-688

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Handle: RePEc:inm:ormnsc:v:57:y:2011:i:4:p:667-688
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  1. Richard Engelbrecht-Wiggans & Elena Katok, 2008. "Regret and Feedback Information in First-Price Sealed-Bid Auctions," Management Science, INFORMS, vol. 54(4), pages 808-819, April.
  2. Miguel A. Costa-Gomes & Georg Weizsäcker, 2004. "Stated Beliefs and Play in Normal Form Games," Levine's Bibliography 122247000000000236, UCLA Department of Economics.
  3. Miguel A. Costa-Gomes & Georg Weizs�cker, 2008. "Stated Beliefs and Play in Normal-Form Games," Review of Economic Studies, Oxford University Press, vol. 75(3), pages 729-762.
  4. De Silva, Dakshina G. & Dunne, Timothy & Kankanamge, Anuruddha & Kosmopoulou, Georgia, 2008. "The impact of public information on bidding in highway procurement auctions," European Economic Review, Elsevier, vol. 52(1), pages 150-181, January.
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