An Ascending Auction in the Presence of Rationality and Herd Behaviour

Ricardo Gonçalves

Discussion Papers from Department of Economics, University of York

Abstract: In this paper we analyse a common value English auction. We argue that rational bidders attempt to estimate each other’s private signals, to take advantage of the additional information disclosed through the bids. If this happens, herd behaviour might arise, because a particular bidder may have an incentive to follow his estimate of some other bidder’s signal, thus dropping his own, and staying in the auction longer than previously optimal. Acting upon beliefs might take the auction to an inefficient outcome, where the bidder who most values the good ends up not getting the object for sale.

Keywords: English Auctions; Rationality; Herd Behaviour (search for similar items in EconPapers)
JEL-codes: D44 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ind and nep-mic
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Persistent link: https://EconPapers.repec.org/RePEc:yor:yorken:99/8

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