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Comparative Static Effects of Number of Bidders and Public Information on Behavior in Second-Price Common Value Auctions

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  • Kagel, John H
  • Levin, Dan
  • Harstad, Ronald M

Abstract

Comparative static tests of Nash bidding theory in second-price common value auctions show that bidders fail to respond in the right direction to more rivals and to public information concerning the value of the item. The former provides a clear indication that bidders fail to appreciate the adverse selection forces inherent in common value auctions, while the latter shows that policy prescriptions can fail given out-of-equilibrium behavior. These tests of Nash bidding theory apply to a far wider variety of circumstances than in first-price auctions, so there is less scope to rationalize the failure of the theory.

Suggested Citation

  • Kagel, John H & Levin, Dan & Harstad, Ronald M, 1995. "Comparative Static Effects of Number of Bidders and Public Information on Behavior in Second-Price Common Value Auctions," International Journal of Game Theory, Springer;Game Theory Society, vol. 24(3), pages 293-319.
  • Handle: RePEc:spr:jogath:v:24:y:1995:i:3:p:293-319
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