Efficiency in Second-Price Auctions: A New Look at Old Data
Rodney Garratt () and
John Wooders ()
University of California at Santa Barbara, Economics Working Paper Series from Department of Economics, UC Santa Barbara
The experimental economics literature on second-price sealed-bid private value auctions has established that subjects typically bid more than their value, despite the fact that value bidding is a dominant strategy in such auctions. Moreover, the laboratory evidence shows that subjects do not learn to bid their values as they gain more experience. In the present paper, we re-examine the second-price auction data from Kagel and Levin’s (1993) classic paper. We find that auction efficiency is rising over time, even though the frequency of overbidding is unchanged. We argue that the rise in efficiency is due to a decline in the variability of overbidding. This is consistent with subjects learning to bid more like each other.
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Journal Article: Efficiency in Second-Price Auctions: A New Look at Old Data (2010)
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