Description
Few forms of market exchange intrigue economists as do auctions, whose theoretical and practical implications are enormous. John Kagel and Dan Levin, complementing their own distinguished research with papers written with other specialists, provide a new focus on common value auctions and the "winner's curse." In such auctions the value of each item is about the same to all bidders, but different bidders have different information about the underlying value. Virtually all auctions have a common value element; among the burgeoning modern-day examples are those organized by Internet companies such as eBay. Winners end up cursing when they realize that they won because their estimates were overly optimistic, which led them to bid too much and lose money as a result.
The authors first unveil a fresh survey of experimental data on the winner's curse. Melding theory with the econometric analysis of field data, they assess the design of government auctions, such as the spectrum rights (air wave) auctions that continue to be conducted around the world. The remaining chapters gauge the impact on sellers' revenue of the type of auction used and of inside information, show how bidders learn to avoid the winner's curse, and present comparisons of sophisticated bidders with college sophomores, the usual guinea pigs used in laboratory experiments. Appendixes refine theoretical arguments and, in some cases, present entirely new data. This book is an invaluable, impeccabl
Chapter
5. How Do Bidders Learn to Overcome the Winner’s Curse?
5.1 Bilateral Bargaining Games
5.2 Inexperienced Bidders in Sealed-Bid Auctions
5.3 Super-Experienced Bidders in Sealed-Bid Auctions
5.4 The Role of Information Feedback on Learning
6. Comparing Results from Field Studies with Experiments
6.1 Direct Comparisons between Laboratory and Field Data
6.2 Differences in Structure between Laboratory and Field Auctions
7.1 Summary of Empirical Findings from the Laboratory
7.2 Theory Motivated by Experiments
7.3 Auction Theory and Experiments at Work: Airwave Rights Auctions
8. Overview of What Follows
2. First-Price Common Value Auctions: Bidder Behavior and the “Winner’s Curse”
2. Structure of the Auctions
3. Theoretical Considerations and the Winner’s Curse
4.2 Individual Bidding Behavior over Time
5. Summary and Conclusions
Appendix: Inexperienced Bidders in Second-Price Common Value Auctions
3. The Winner’s Curse and Public Information in Common Value Auctions
1. Structure of the Auctions
1.1 Basic Auction Structure
1.2 Auctions with Public Information
1.3 Varying Numbers of Bidders
1.4 The Experience Factor
2. Theoretical Considerations
2.1 Private Information Conditions
2.2 Effects of Public Information
2.3 Summary of Research Questions of Primary Interest
3.1 Bidding Patterns with Private Information
3.2 Effects of Public Information on Seller’s Revenues
3.3 Summary of Experimental Outcomes of Primary Interest
4. Toward Generalizability: But Is This How the Real World Operates?
Addendum: Benchmark Equilibrium for First-Price Auctions with Public Information
4.Comparative Static Effects of Number of Bidders and Public Information on Behavior in Second-Price Common Value Auctions
2. Structure of the Auctions
2.1 Basic Auction Structure
2.2 Auctions with Public Information
2.3 Subject Experience and Varying Numbers of Bidders
3. Theoretical Considerations
3.1 Naive Bidding under Private Information Conditions: A Model of the Winner’s Curse
3.2 Nash Equilibrium Bidding under Private Information Conditions
3.3 Naive Bidding under Public Information Conditions
3.4 Nash Equilibrium Bidding under Public Information Conditions
4.1 Bidding Patterns with Private Information
4.2 Effects of Public Information on Revenue
5. Summary and Conclusions
5. Information Impact and Allocation Rules in Auctions with Affliated Private Values: A Laboratory Study
2. Structure of the Auctions
2.2 Second-Price/English Auctions
3. Theoretical Predictions
3.2 Second-Price/English Auctions
4.2 Second-Price/English Auctions
5. Summary and Conclusions
Appendix B: Derivation of Risk-Neutral Nash Bid Function
6. Revenue Effects and Information Processing in English Common Value Auctions
1. Structure of the Auctions
2. Theoretical Considerations
2.1 Factors Promoting Revenue Raising in English Auctions
2.2 Forces Inhibiting Revenue Raising in English Auctions
3.1 Revenue Effects of English Auctions
3.2 Bidding Behavior in English Auctions
4. Relationship to Field Data
5. Summary and Conclusions
Appendix A: Derivation of Equilibrium Bid Functions
Appendix B: Full Information Maximum Likelihood Estimates
7. Common Value Auctions with Insider Information
1. Structure of the Auctions
2. Theoretical Considerations
2.2 Auctions with Symmetric Information Structure (SIS)
2.3 Auctions with Asymmetric Information Structure (AIS)
3.1 Auctions with Inexperienced Bidders
3.2 Super-Experienced Bidders
3.3 Learning and Adjustments in Insider’s Bids over Time
4. Summary and Conclusions
Appendix: Increases in Expected Revenue in Auctions with Insider Information
8. Can the Seller Benefit from an Insider in Common-Value Auctions?
2.1 Environments of No Private Information
2.2 Homogeneous Private Information
2.3 Heterogeneous Bidders I: Partitioned Information
2.4 Heterogeneous Bidders II: Nonpartitioned Information
9. Second-Price Auctions with Asymmetric Payoffs: An Experimental Investigation
4. Experimental Hypotheses
6. Summary and Conclusion
10. Learning in Common Value Auctions: Some Initial Observations
3. Theoretical Considerations: Measures of Learning and Adjustment
4.1 The Data to Be Explained: Adjustments in Bidding over Time in First-Price Auctions
4.2 Market Adjustments: Self-Selection among Returning Bidders
4.3 Learning/Adjustment Mechanisms for Individual Bidders
11. Cross-Game Learning: Experimental Evidence from First-Price and English Common Value Auctions
2. Experimental Procedures and Performance Measures
4. Analysis and Conclusions
12. A Comparison of Naive and Experienced Bidders in Common Value Offer Auctions: A Laboratory Analysis
1. Structure of the Auctions
2. Theoretical Considerations
3.1 Experiments with N = 4
3.2 Effects of Changing N and Public Information
4. Conclusion and Discussion
13. Bidding in Common Value Auctions: How the Commercial Construction Industry Corrects for the Winner’s Curse
2. Bidding Structure, Industry Characteristics, and Sample Data
3. Theoretical Considerations
4. Bid Distribution Characteristics of Sample Data
5. Differences in Auction Structure between Theory and Practice
5.1 Mechanisms for Escaping the Winner’s Curse
5.2 Avoiding the Winner’s Curse: Situation-Specific Learning
5.3 Private Value/Chance Elements in Bidding
6. Industry-Specific Characteristics and Their Relationship to Auction Theory
7. Summary and Conclusions
Appendix: Variation in Subcontractor Bids to General Contractors
Common Value Auctions and the Winners Curse
：Common Value Auctions and the Winner's Curse
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