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Strategic Implications of Uncertainty Over One’s Own Private Value in Auctions

  • Eric Rasmusen

    (Department of Business Economics and Public Policy, Indiana University Kelley School of Business)

Suppose a bidder must decide whether and when to incur the cost of estimating his own private value in an auction. This can explain why a bidder might increase his bid ceiling in the course of an auction, and why a bidder would like to know the private values of other bidders. It also can explain sniping — flurries of bids at the end of auctions with deadlines — as the result of other bidders trying to avoid stimulating the uninformed bidder to examine his value.

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File URL: http://kelley.iu.edu/riharbau/RePEc/iuk/wpaper/bepp2004-13-rasmusen.pdf
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Paper provided by Indiana University, Kelley School of Business, Department of Business Economics and Public Policy in its series Working Papers with number 2004-13.

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Date of creation: 2004
Date of revision:
Publication status: Published in Advances in Theoretical Economics, 2006
Handle: RePEc:iuk:wpaper:2004-13
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  1. Eric Rasmusen, 2007. "Getting Carried Away in Auctions as Imperfect Value Discovery," Working Papers 2007-05, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.
  2. Engelbrecht-Wiggans, Richard, 2001. "The effect of entry and information costs on oral versus sealed-bid auctions," Economics Letters, Elsevier, vol. 70(2), pages 195-202, February.
  3. McAfee, R. Preston & McMillan, John, 1987. "Auctions with a stochastic number of bidders," Journal of Economic Theory, Elsevier, vol. 43(1), pages 1-19, October.
  4. Michael J. Fishman, 1988. "A Theory of Preemptive Takeover Bidding," RAND Journal of Economics, The RAND Corporation, vol. 19(1), pages 88-101, Spring.
  5. Eric Rasmusen, 1996. "Bertrand Competition Under Uncertainty," Industrial Organization 9607002, EconWPA.
  6. Rasmusen Eric Bennett, 2001. "Explaining Incomplete Contracts as the Result of Contract-Reading Costs," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 1(1), pages 1-39, October.
  7. Levin, Dan & Smith, James L, 1994. "Equilibrium in Auctions with Entry," American Economic Review, American Economic Association, vol. 84(3), pages 585-99, June.
  8. Burdett, Kenneth & Judd, Kenneth L, 1983. "Equilibrium Price Dispersion," Econometrica, Econometric Society, vol. 51(4), pages 955-69, July.
  9. Hirshleifer, David, 1989. "Facilitation of Competing Bids and the Price of a Takeover Target," University of California at Los Angeles, Anderson Graduate School of Management qt2496649g, Anderson Graduate School of Management, UCLA.
  10. Thomas D. Jeitschko, 1998. "Learning in Sequential Auctions," Southern Economic Journal, Southern Economic Association, vol. 65(1), pages 98-112, July.
  11. Alvin E. Roth & Axel Ockenfels, 2000. "Last Minute Bidding and the Rules for Ending Second-Price Auctions: Theory and Evidence from a Natural Experiment on the Internet," NBER Working Papers 7729, National Bureau of Economic Research, Inc.
  12. Milgrom, Paul R & Weber, Robert J, 1982. "A Theory of Auctions and Competitive Bidding," Econometrica, Econometric Society, vol. 50(5), pages 1089-1122, September.
  13. Alvin E. Roth & Axel Ockenfels, 2002. "Last-Minute Bidding and the Rules for Ending Second-Price Auctions: Evidence from eBay and Amazon Auctions on the Internet," American Economic Review, American Economic Association, vol. 92(4), pages 1093-1103, September.
  14. Hausch, Donald B & Li, Lode, 1993. "A Common Value Auction Model with Endogenous Entry and Information Acquisition," Economic Theory, Springer, vol. 3(2), pages 315-34, April.
  15. Patrick Bajari & Ali Hortacsu, 2000. "Winner's Curse, Reserve Prices and Endogenous Entry: Empirical Insights from eBay Auctions," Econometric Society World Congress 2000 Contributed Papers 1927, Econometric Society.
  16. Nicola Persico, 1997. "Information Acquisition in Auctions," UCLA Economics Working Papers 762, UCLA Department of Economics.
  17. Ye Lixin, 2004. "Optimal Auctions with Endogenous Entry," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 4(1), pages 1-29, October.
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