Bidding in a Possibly Common-Value Auction

We analyze a second-price auction with two bidders in which only one of the bidders is informed as to whether the object is valued commonly. We show that any equilibrium strategy of the bidder who is uninformed must be part of an equilibrium when both bidders instead know that the auction is not common value, regardless of the way in which the values are different. We derive su¢ cient conditions for equilibrium existence

The Winner's Curse: Experiments with Buyers and with Sellers

This paper presents a replication and extension of experiments with the "winner's curse" which were initiated in John Kagel and Dan Levin (1984, 1986) and Douglas Dyer et al. (1989). The common-value auction involves firms bidding for an item of unknown common value. Since the value of the item is unknown, the winners can bid more than the value and thereby lose money. The winner's curse occurs if the winners of auctions systematically bid above the actual value of the objects and thereby systematically incur losses. The phenomenon is said to occur possibly in the bidding for such natural resources as mineral rights, where the value of the mineral is unknown but each firm has an estimate of the value. Due to the field nature of the data, doubts have existed as to the actual existence of the curse. The Kagel and Levin (1986) paper tested for the existence of the phenomenon in a laboratory setting. The hope is that, by achieving a thorough understanding of the phenomenon as it might exist in simple laboratory environments, economists will become better equipped to identify and study the phenomenon in more-complex field settings

Lowest Unique Bid Auctions

We consider a class of auctions (Lowest Unique Bid Auctions) that have achieved a considerable success on the Internet. Bids are made in cents (of euro) and every bidder can bid as many numbers as she wants. The lowest unique bid wins the auction. Every bid has a fixed cost, and once a participant makes a bid, she gets to know whether her bid was unique and whether it was the lowest unique. Information is updated in real time, but every bidder sees only what's relevant to the bids she made. We show that the observed behavior in these auctions differs considerably from what theory would prescribe if all bidders were fully rational. We show that the seller makes money, which would not be the case with rational bidders, and some bidders win the auctions quite often. We describe a possible strategy for these bidders

On Some Myths about Sequenced Common-valued Auctions

Equilibria are constructed for classes of game models of sequenced second-price auctions having identical common-valued objects. In some of these the equilibrium price falls on average, and in others the seller loses on average by committing to announce publicly something that he knows. Both of these possibilities are surprisesPublicad

The Timing of Bid Placement and Extent of Multiple Bidding: An Empirical Investigation Using eBay Online Auctions

Online auctions are fast gaining popularity in today's electronic commerce. Relative to offline auctions, there is a greater degree of multiple bidding and late bidding in online auctions, an empirical finding by some recent research. These two behaviors (multiple bidding and late bidding) are of ``strategic'' importance to online auctions and hence important to investigate. In this article we empirically measure the distribution of bid timings and the extent of multiple bidding in a large set of online auctions, using bidder experience as a mediating variable. We use data from the popular auction site \url{www.eBay.com} to investigate more than 10,000 auctions from 15 consumer product categories. We estimate the distribution of late bidding and multiple bidding, which allows us to place these product categories along a continuum of these metrics (the extent of late bidding and the extent of multiple bidding). Interestingly, the results of the analysis distinguish most of the product categories from one another with respect to these metrics, implying that product categories, after controlling for bidder experience, differ in the extent of multiple bidding and late bidding observed in them. We also find a nonmonotonic impact of bidder experience on the timing of bid placements. Experienced bidders are ``more'' active either toward the close of auction or toward the start of auction. The impact of experience on the extent of multiple bidding, though, is monotonic across the auction interval; more experienced bidders tend to indulge ``less'' in multiple bidding.Comment: Published at http://dx.doi.org/10.1214/088342306000000123 in the Statistical Science (http://www.imstat.org/sts/) by the Institute of Mathematical Statistics (http://www.imstat.org

The Winner's Curse: Experiments with Buyers and with Sellers

This paper presents a replication and extension of experiments with the "winner's curse" which were initiated in John Kagel and Dan Levin (1984, 1986) and Douglas Dyer et al. (1989). The common-value auction involves firms bidding for an item of unknown common value. Since the value of the item is unknown, the winners can bid more than the value and thereby lose money. The winner's curse occurs if the winners of auctions systematically bid above the actual value of the objects and thereby systematically incur losses. The phenomenon is said to occur possibly in the bidding for such natural resources as mineral rights, where the value of the mineral is unknown but each firm has an estimate of the value. Due to the field nature of the data, doubts have existed as to the actual existence of the curse. The Kagel and Levin (1986) paper tested for the existence of the phenomenon in a laboratory setting. The hope is that, by achieving a thorough understanding of the phenomenon as it might exist in simple laboratory environments, economists will become better equipped to identify and study the phenomenon in more-complex field settings

The European UTMS/IMT2000 license auctions

We survey the recent European UMTS license auctions and compare their outcomes with the predictions of a simple model that emphasizes future market structure as a main determinant of valuations for licenses. Since the main goal of most spectrum allocation procedures is economic efficiency, and since consumers (who are affected by the ensuing market structure) do not participate at the auction stage, good designs must alleviate the asymmetry among incumbents and potential entrants by actively encouraging entry