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Seller Behavior in Common Value Auctions: Cursed and Cursed Again

Author

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  • Michael S. Visser

    (University of Oregon Economics Department (Student))

Abstract

In common value auctions the winning bid often exceeds the value of the good purchased. This "winnerÂ’s curse" is bad for the buyers, but good for the sellers. Given this, people bidding for the right to resell a good might be expected to bid more than the expected value. Furthermore, if sellers have different forecasts about the extent of the winnerÂ’s curse among buyers, then the value of the right to resell is in turn a common value good, and potential sellers might even be expected to suffer from a winnerÂ’s curse of their own. In this paper I report on results from a new experiment where one group of people enter an auction for the right to auction a common value good to another group. I find a winnerÂ’s curse among the buyers, extending the results others have found into a new experimental setting where the auctioneer is a participant in the experiment, rather than the experimenter. I also find that the sellers do overbid, and so suffer from a curse of their own.

Suggested Citation

  • Michael S. Visser, 2003. "Seller Behavior in Common Value Auctions: Cursed and Cursed Again," University of Oregon Economics Department Working Papers 2004-7, University of Oregon Economics Department.
    • Handle: RePEc:ore:uoecwp:2004-7
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    File URL: http://economics.uoregon.edu/papers/UO-2004-7_Visser_Winners_Curse.pdf
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    More about this item

    Keywords

    winnerÂ’s curse; adverse selection; auction;
    All these keywords.

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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