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Impact of Valuation Ranking Information on Bidding in First-Price

  • A. Alexander Elbittar

    (CIDE)

Landberger et al. (2001) identified optimal bidder behavior in first- price private-value auctions when the ranking of valuations is common knowledge, and derived comparative-statics predictions regarding the auctioneer’s expected revenue and the efficiency of the allocation. The experiment reported here tests the behavioral components of these comparative-statics predictions. The results support the prediction that buyers are inclined to bid more aggressively when they learn they have the low value. Contrary to the theory, buyers are inclined to bid less when they learn they have the high value. Consistent with theory, the overall proportion of efficient allocations is lower than in the first- price auction before information is revealed. But as a result of high- value bidders decreasing their bids, the expected revenue does not increase on a regular basis, contrary to the theory’s predictions.

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Paper provided by EconWPA in its series Microeconomics with number 0508008.

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Length: 33 pages
Date of creation: 22 Aug 2005
Date of revision:
Handle: RePEc:wpa:wuwpmi:0508008
Note: Type of Document - pdf; prepared on Win98; pages: 33
Contact details of provider: Web page: http://econwpa.repec.org

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  1. Kagel, John H & Harstad, Ronald M & Levin, Dan, 1987. "Information Impact and Allocation Rules in Auctions with Affiliated Private Values: A Laboratory Study," Econometrica, Econometric Society, vol. 55(6), pages 1275-1304, November.
  2. Güth, Werner & Ivanova-Stenzel, Radosveta & Wolfstetter, Elmar, 2001. "Bidding behavior in asymmetric auctions: An experimental study," SFB 373 Discussion Papers 2001,15, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
  3. Kagel, John H & Levin, Dan, 1991. "The Winner's Curse and Public Information in Common Value Auctions: Reply," American Economic Review, American Economic Association, vol. 81(1), pages 362-69, March.
  4. Athey, S., 1997. "Sigle Crossing Properties and the Existence of Pure Strategy Equilibria in Games of Incomplete Information," Working papers 97-11, Massachusetts Institute of Technology (MIT), Department of Economics.
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  11. Hanming Fang, 2004. "Multidimensional Private Value Auctions," Theory workshop papers 121473000000000021, UCLA Department of Economics.
  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.
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  14. Michael Landsberger & Jacob Rubinstein & Elmar Wolfstetter & Shmuel Zamir, 1999. "First-Price Auctions when the Ranking of Valuations is Common Knowledge," Working Papers 99-18, Centre de Recherche en Economie et Statistique.
  15. Wolfstetter, Elmar, 1996. " Auctions: An Introduction," Journal of Economic Surveys, Wiley Blackwell, vol. 10(4), pages 367-420, December.
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  17. Paul Klemperer, 2004. "Auctions: Theory and Practice," Economics Papers 2004-W09, Economics Group, Nuffield College, University of Oxford.
  18. Pezanis-Christou, P, 1997. "On the Impact of Low-Balling : Experimental Results in Asymmetric Auctions," Papers 97/05, New South Wales - School of Economics.
  19. Kim, Jinwoo & Che, Yeon-Koo, 2004. "Asymmetric information about rivals' types in standard auctions," Games and Economic Behavior, Elsevier, vol. 46(2), pages 383-397, February.
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