Competitive Bidding in Auctions with Private and Common Values

Jacob Goeree and Theo Offerman

Virginia Economics Online Papers from University of Virginia, Department of Economics

Abstract: The objects for sale in most auctions display both private and common value characteristics. This salient feature of many real-world auctions has not yet been incorporated into a strategic analysis of equilibrium bidding behavior. This paper reports such an analysis in the context of a stylized model in which bidders receive a private value signal and an independent common value signal. We show that more uncertainty about the common value results in lower efficiency and higher profits for the winning bidder. Information provided by the auctioneer decreases uncertainty, which improves efficiency and increases the seller's revenue. These positive effects of public information disclosure are stronger the more precise the information. Efficiency and revenues are also higher when more bidders enter the auction. Since our model nests both the private and common value case it may lead to an improved specification of empirical models of auctions.

Keywords: Auctions; inefficiencies; information disclosure; competition. (search for similar items in EconPapers)
JEL-codes: C72 D44 (search for similar items in EconPapers)
Pages: 31 pages
Date: 1999-11
New Economics Papers: this item is included in nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

Downloads: (external link)
http://repec.as.virginia.edu/RePEc/vir/virpap/papers/virpap337.pdf (application/pdf)

Related works:
Journal Article: Competitive Bidding in Auctions with Private and Common Values (2003)
Working Paper: Competitive Bidding in Auctions with Private and Common Values (2000)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:vir:virpap:337

Access Statistics for this paper

More papers in Virginia Economics Online Papers from University of Virginia, Department of Economics
Bibliographic data for series maintained by Debby Stanford ().