The Winner's Curse and Public Information in Common Value Auctions

John Kagel and Dan Levin ()

American Economic Review, 1986, vol. 76, issue 5, 894-920

Abstract: In common value auction experiments, individual judgment errors significantly alter market outcomes relative to standard economic formulations. Experienced bidders show sensitivity to the strategic considerations underlying the auction but not to item valuation considerations. Nash equilibrium models accurately characterize auctions with small numbers of bidders_(3-4). However, auctions with large numbers_(6-7) produce more aggressive bidding, resulting in negative profits, the winner's curse. Public informationreducing value uncertainty raises seller's revenues in the absence of a winner's curse, but reduces revenue in its presence. Similarities between laboratory and field data from outer continental shelf lease sales are discussed.

Date: 1986
References: Add references at CitEc
Citations: View citations in EconPapers (276)

Downloads: (external link)
http://www.jstor.org/stable/pdf/1816459.pdf full text (application/pdf)
Access to full text is restricted to JSTOR subscribers. See http://www.jstor.org for details.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:aea:aecrev:v:76:y:1986:i:5:p:894-920

Ordering information: This journal article can be ordered from
https://www.aeaweb.org/journals/subscriptions

Access Statistics for this article

American Economic Review is currently edited by Esther Duflo

More articles in American Economic Review from American Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Michael P. Albert ().