Common-Value Auctions

Pak-Sing Choi and Felix Munoz-Garcia
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Pak-Sing Choi: National Central University
Felix Munoz-Garcia: Washington State University

Chapter 7 in Auction Theory, 2025, pp 253-272 from Springer

Abstract: Abstract This chapter examines auctions where all bidders share the same (common) value for the object, but none of them observe an accurate signal of the object’s true valuation. Instead, every bidder privately observes a noisy signal about the object’s value and, based on this signal, submits a bid. This model is typically used to analyze the auctioning of oil leases, as firms exploiting the oil reservoir would earn a similar profit if they win the auction, but they have imprecise and potentially different signals of the amount of oil barrels in the reservoir (as they receive different engineering reports) and, as a consequence, hold different estimates of the oil lease’s profitability.

Keywords: Common-value auctions; Winner’s curse; Observed signal; Overestimation; Interdependent values (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/978-3-031-93271-7_7

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