On the informational inefficiency of discriminatory price auctions
We analyze bidding behavior in large discriminatory price auctions where the number of objects is a non-trivial proportion of the number of bidders. Bidders observe private signals that are affiliated with the common value. We show that the average price in the auction is biased downward from the expected value of the objects, even in the competitive limit. In particular, we show that conditional on relatively low signals, bidders bid the expected value of the objects conditional n their information and winning; while bids at higher signals flatten out and are below the expected value conditional on winning.
|Date of creation:||Jan 2004|
|Date of revision:|
|Publication status:||Published in Journal of Economic Theory, V. 132, #1, (2007) pp. 507-517|
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|Order Information:|| Postal: Working Paper Assistant, Division of the Humanities and Social Sciences, 228-77, Caltech, Pasadena CA 91125|
References listed on IDEAS
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Econometric Society, vol. 65(6), pages 1247-1282, November.
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- Robert Wilson, 1977. "A Bidding Model of Perfect Competition," Review of Economic Studies, Oxford University Press, vol. 44(3), pages 511-518.
- Jackson, Matthew O. & Kremer, Ilan, 2004. "The relationship between the allocation of goods and a seller's revenue," Journal of Mathematical Economics, Elsevier, vol. 40(3-4), pages 371-392, June.
- Bali, Valentina & Jackson, Matthew, 2002. "Asymptotic Revenue Equivalence in Auctions," Journal of Economic Theory, Elsevier, vol. 106(1), pages 161-176, September.
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