Comparative Static Effects of Number of Bidders and Public Information on Behavior in Second-Price Common Value Auctions

John Kagel, Dan Levin () and Ronald Harstad

International Journal of Game Theory, 1995, vol. 24, issue 3, 293-319

Abstract: Comparative static tests of Nash bidding theory in second-price common value auctions show that bidders fail to respond in the right direction to more rivals and to public information concerning the value of the item. The former provides a clear indication that bidders fail to appreciate the adverse selection forces inherent in common value auctions, while the latter shows that policy prescriptions can fail given out-of-equilibrium behavior. These tests of Nash bidding theory apply to a far wider variety of circumstances than in first-price auctions, so there is less scope to rationalize the failure of the theory.

Date: 1995
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