The Loser's Curse and Information Aggregation in Common Value Auctions

Wolfgang Pesendorfer () and Jeroen Swinkels ()

No 1147, Discussion Papers from Northwestern University, Center for Mathematical Studies in Economics and Management Science

Abstract: We consider an auction in which k identical objects of unknown value are auctioned off to n bidders. The k highest bidders get an object and pay the k+1st bid. Bidders receive a signal that provides information about the value of the object. We characterize the unique symmetric equilibirum of this auction. We then consider a sequence of auctions Ar with nr bidders and kr objects. We show that price converges in probability to the true value of the object if and only if both kr-->infinity and nr--kr-->infinity, i.e., the number of objects and the number of bidders who do not receive an object in equilibrium go to infinty.

Date: 1995-12
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Journal Article: The Loser's Curse and Information Aggregation in Common Value Auctions (1997)
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