Information Precision and Common Value Partnership Dissolution: An Experimental Study

Yuri Khoroshilov

Managerial and Decision Economics, 2017, vol. 38, issue 6, 822-831

Abstract: This paper develops a simple model of ½ auctions in a partnership dissolution game with common values, analyzes how information precision affects the equilibrium, and uses a laboratory study to test the model's predictions. Consistent with the model's prediction, the study shows that when bidders have the same quality information, higher precision leads to more extreme bids. In the case of unequal precision, bidders must use the same bidding functions regardless of their own information quality, and thus, the equilibrium strategy should be the same for both bidders. The experimental results, however, contradicts this prediction. Copyright © 2016 John Wiley & Sons, Ltd.

Date: 2017
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