Efficiency in Second-Price Auctions: A New Look at Old Data
The experimental economics literature on second-price sealed-bid private value auctions has established that subjects typically bid more than their value, despite the fact that value bidding is a dominant strategy in such auctions. Moreover, the laboratory evidence shows that subjects do not learn to bid their values as they gain more experience. In the present paper, we re-examine the second-price auction data from Kagel and Levinâ€™s (1993) classic paper. We find that auction efficiency is rising over time, even though the frequency of overbidding is unchanged. We argue that the rise in efficiency is due to a decline in the variability of overbidding. This is consistent with subjects learning to bid more like each other.
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- Bergstrom, Carl T. & Bergstrom, Ted C & Garratt, Rod, 2009. "Ideal Bootstrapping and Exact Recombination: Applications to Auction Experiments," University of California at Santa Barbara, Economics Working Paper Series qt4xb7454q, Department of Economics, UC Santa Barbara.
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"Efficiency in Second-Price Auctions: A New Look at Old Data,"
Review of Industrial Organization,
Springer;The Industrial Organization Society, vol. 37(1), pages 43-50, August.
- Garratt, Rod & Wooders, John, 2004. "Efficiency in Second-Price Auctions: A New Look at Old Data," University of California at Santa Barbara, Economics Working Paper Series qt5d86p46d, Department of Economics, UC Santa Barbara.
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