Second-price common value auctions with uncertainty, private and public information: Experimental evidence

Isabelle Brocas, Juan D. Carrillo and Manuel Castro

Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), 2017, vol. 67, issue C, 28-40

Abstract: We conduct a laboratory experiment of second-price sealed bid auctions of a common value good with two bidders. Bidders face three different types of information: common uncertainty (unknown information), private information (known by one bidder) and public information (known by both bidders), and auctions differ on the relative importance of these three types of information. We find that subjects barely differentiate between private and public information and deviate from the theoretical predictions with respect to all three types of information. There is under-reaction to both private and public information and systematic overbidding in all auctions above and beyond the standard winner’s curse. The Cursed Equilibrium and Level-k models successfully account for some features of the data but others remain largely unexplained.

Keywords: Laboratory experiments; Second-price common value auctions; Winner’s curse; Level-k; Cursed equilibrium (search for similar items in EconPapers)
JEL-codes: C92 D44 D82 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Working Paper: Second-price common value auctions with uncertainty, private and public information: experimental evidence (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:soceco:v:67:y:2017:i:c:p:28-40

DOI: 10.1016/j.socec.2016.12.008

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