Interdependent value auctions with insider information: Theory and experiment

Syngjoo Choi, Jose-Alberto Guerra and Jinwoo Kim

Games and Economic Behavior, 2019, vol. 117, issue C, 218-237

Abstract: We develop a model of interdependent value auctions in which two types of bidders compete: insiders, who are perfectly informed about their value, and outsiders, who are informed only about the private component of their value. Because the bidding strategy of outsiders cannot efficiently adjust with that of insiders, the second-price auction is inefficient. The English auction has an equilibrium in which the information outsiders infer from the history of drop-out prices enables them to bid toward attaining efficiency. The presence of insiders has positive impacts on the seller's revenue. A laboratory experiment confirms key theoretical predictions, despite evidence of naive bidding.

Keywords: Interdependent value auctions; Asymmetric information structure; Second-price auction; English auction; Experiment (search for similar items in EconPapers)
JEL-codes: C92 D44 D82 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Working Paper: Interdependent Value Auctions with Insider Information: Theory and Experiment (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:gamebe:v:117:y:2019:i:c:p:218-237

DOI: 10.1016/j.geb.2019.06.007

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