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...

Full description

Saved in:
Bibliographic Details
Published inJournal of economic theory Vol. 132; no. 1; pp. 507 - 517
Main Authors Jackson, Matthew O., Kremer, Ilan
Format Journal Article
LanguageEnglish
Published New York Elsevier Inc 2007
Elsevier
Elsevier Science Publishing Company, Inc
SeriesJournal of Economic Theory
Subjects
Asymptotic efficiency
Auction
Auctions
Competition
Discriminatory auction
Economic efficiency
Economic theory
Efficient market hypothesis
Efficient markets
Expected values
Market theory
Prices
Studies
D41
Competition
Discriminatory auction
Efficient markets
D44
Auction
Efficient market hypothesis
G14
Asymptotic efficiency
C72
Online AccessGet full text

Cover

More Information
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.
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