On the informational inefficiency of discriminatory price auctions
We analyze bidding behavior in large discriminatory-price auctions in a common value setting where the number of objects is a non-trivial proportion of the number of bidders. We show that the average price paid in the auction is biased downward from the expected value of the objects, even in the com...
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Published in | Journal of economic theory Vol. 132; no. 1; pp. 507 - 517 |
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Main Authors | , |
Format | Journal Article |
Language | English |
Published |
New York
Elsevier Inc
2007
Elsevier Elsevier Science Publishing Company, Inc |
Series | Journal of Economic Theory |
Subjects | |
Online Access | Get full text |
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Summary: | We analyze bidding behavior in large discriminatory-price auctions in a common value setting where the number of objects is a non-trivial proportion of the number of bidders. We show that the average price paid in the auction is biased downward from the expected value of the objects, even in the competitive limit. We show that conditional on a signal that falls below a threshold, a bidder bids no more than the expected value of an object conditional on the signal and winning; while conditional on any signal that lies above the threshold the bid is strictly lower than the expected value conditional on the signal and winning. |
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Bibliography: | ObjectType-Article-2 SourceType-Scholarly Journals-1 ObjectType-Feature-1 content type line 23 |
ISSN: | 0022-0531 1095-7235 |
DOI: | 10.1016/j.jet.2004.06.011 |