Interdependent Value Auctions with Insider Information: Theory and Experiment

Syngjoo Choi, Jose-Alberto Guerra and Jinwoo Kim ()

Working Paper Series from Institute of Economic Research, Seoul National University

Abstract: We develop a model of interdependent value auctions in which two types of bidders compete: insiders, who are perfectly informed about their value, and outsiders, who are informed only about the private component of their value. Because of the mismatch of bidding strategies between insiders and outsiders, the second-price auc- tion is inefficient. The English auction has an equilibrium in which the information outsiders infer from the history of drop-out prices enables them to bid toward attaining ecffiency. The presence of insiders has positive impacts on the seller¡¯s revenue. A laboratory experiment confirms key theoretical predictions, despite evidence of naive bidding.

Keywords: Interdependent value auctions; asymmetric information structure; second- price auction; English auction, experiment (search for similar items in EconPapers)
JEL-codes: C92 D44 D82 (search for similar items in EconPapers)
Date: 2018-09
New Economics Papers: this item is included in nep-com, nep-des, nep-exp, nep-gth and nep-ore
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Journal Article: Interdependent value auctions with insider information: Theory and experiment (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:snu:ioerwp:no114

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