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Impact of Valuation Ranking Information on Bidding in First-Price

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  • A. Alexander Elbittar

    (CIDE)

Abstract

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.

Suggested Citation

  • A. Alexander Elbittar, 2005. "Impact of Valuation Ranking Information on Bidding in First-Price," Microeconomics 0508008, EconWPA.
  • Handle: RePEc:wpa:wuwpmi:0508008
    Note: Type of Document - pdf; prepared on Win98; pages: 33
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    File URL: https://econwpa.ub.uni-muenchen.de/econ-wp/mic/papers/0508/0508008.pdf
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    References listed on IDEAS

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    1. Roger B. Myerson, 1978. "Optimal Auction Design," Discussion Papers 362, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
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    Cited by:

    1. Guth, Werner & Ivanova-Stenzel, Radosveta & Wolfstetter, Elmar, 2005. "Bidding behavior in asymmetric auctions: An experimental study," European Economic Review, Elsevier, vol. 49(7), pages 1891-1913, October.

    More about this item

    Keywords

    Asymmetric auctions; laboratory experiments; affiliation and economics of information;

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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