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Competitive Bidding in Auctions with Private and Common Values
No full textThe objects for sale in most auctions possess both private and common value elements. This salient feature has not yet been incorporated into a strategic analysis of equilibrium bidding behaviour. This paper reports such an analysis for a stylised model in which bidders receive a private value signal and an independent common value signal. We show that more uncertainty about the common value has a negative effect on efficiency. Information provided by the seller decreases uncertainty, which raises efficiency and seller s revenues. Efficiency and revenues are also higher when more bidders enter the auction
Winner's Curse without Overbidding
No full textWe report the results of a series of second-price auction experiments where each bidder's signal is given by a normally distributed value plus a normally distributed error. While bidders’ values differ in one treatment they are the same in another, which allows for a direct test of the "winner's curse" irrespective of confounding factors. Bidders may also fall prey to a "news curse" when they do not sufficiently take into account that signals and errors are correlated. We find that the effects of the winner's curse are mitigated by a news curse and loss or risk aversion
Hurting Hurts More Than Helping Helps
No full textPrevious experimental work suggests that both a dislike for an unequal division of payoffs and intentionality play a role to explain reciprocal behavior. This paper focuses on intentionality, and in particular on the question of whether negative intentionality matters more than positive intentionality. Experimental evidence obtained in the ‘hot response game’ suggests that this is the case: subjects are 67% more likely to reciprocate an intentional hurtful choice over an unintentional hurtful choice. Subjects are only 25% more likely to reciprocate an intentional helpful choice over an unintentional helpful choice. Additional evidence on the role of emotions helps explain this asymmetry between positive and negative intentionality. It is argued that a self-serving attributional style may be responsible for the observed phenomenon
What's causing overreaction?: An experimental investigation of recency and the hot hand effect
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