John H. Kagel, Dan Levin

Common Value Auctions and the Winner's Curse

• Gebundenes Buch

Produktbeschreibung

An invaluable account of how auctions work-and how to make them work 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, impeccably up-to-date resource on how auctions work--and how to make them work.

Produktdetails

• Verlag: Princeton University Press
• Seitenzahl: 420
• Erscheinungstermin: 11. August 2002
• Englisch
• Abmessung: 240mm x 161mm x 29mm
• Gewicht: 872g
• ISBN-13: 9780691016672
• ISBN-10: 0691016674
• Artikelnr.: 22739260

Autorenporträt

John H. Kagel is University Chaired Professor of Applied Economics and director of the Economics Laboratory at Ohio State University. A leading economic theorist, he is coeditor of, and a contributor to, The Handbook of Experimental Economics (Princeton). Dan Levin is professor of economics at Ohio State University. He has published numerous articles on competitive bidding and industrial organization in leading economic journals.

Inhaltsangabe

Preface xiii Credits xv Chapter 1. Bidding in Common Value Auctions: A
Survey of Experimental Research by John H. Kagel and Dan Levin 1 1. An
Initial Experiment Demonstrating the Winner's Curse 4 Chapter 2. Sealed-Bid
Auctions 5 2.1 Theoretical Considerations: First-Price Sealed-Bid Auctions
6 2.2 Some Initial Experimental Results: Inexperienced Bidders 7 2.3
Auctions with Moderately Experienced Bidders and the Effects of Public
Information on Sellers' Revenue 7 2.4 Is the Winner's Curse a Laboratory
Artifact? Limited Liability for Losses 13 2.5 Second-Price Sealed-Bid
Auctions 16 2.6 Group versus Individual Bids 20 2.7 Summing Up 22 3.
English Auctions and First-Price Auctions with Insider Information 23 3.1
English Auctions 24 3.2 Auctions with Insider Information 27 4. The
Winner's Curse in Other Settings 33 4.1 The Winner's Curse in Bilateral
Bargaining Games 33 4.2 The Winner's Curse in "Blind-Bid" Auctions 36 4.3
Lemons and Ripoffs: The Winner's Curse in Markets with Quality Endogenously
Determined 39 4.4 The Swing Voter's Curse 40 4.5 Summing Up 46 5. How Do
Bidders Learn to Overcome the Winner's Curse? 47 5.1 Bilateral Bargaining
Games 47 5.2 Inexperienced Bidders in Sealed-Bid Auctions 48 5.3
Super-Experienced Bidders in Sealed-Bid Auctions 51 5.4 The Role of
Information Feedback on Learning 52 6. Comparing Results from Field Studies
with Experiments 53 6.1 Direct Comparisons between Laboratory and Field
Data 56 6.2 Differences in Structure between Laboratory and Field Auctions
58 6.3 Summing Up 60 7. Concluding Remarks 60 7.1 Summary of Empirical
Findings from the Laboratory 60 7.2 Theory Motivated by Experiments 62 7.3
Auction Theory and Experiments at Work: Airwave Rights Auctions 65 8.
Overview of What Follows 66 Chapter 2. First-Price Common Value Auctions:
Bidder Behavior and the "Winner's Curse" by John H. Kagel, Dan Levin,
Raymond C. Battalio, and Donald J. Meyer 85 1. Introduction 85 2. Structure
of the Auctions 86 3. Theoretical Considerations and the Winner's Curse 87
4. Experimental Results 89 4.1 Market Outcomes 89 4.2 Individual Bidding
Behavior over Time 93 5. Summary and Conclusions 100 Appendix:
Inexperienced Bidders in Second-Price Common Value Auctions 101 Notes 104
References 105 Chapter 3. The Winner's Curse and Public Information in
Common Value Auctions by John H. Kagel and Dan Levin 107 1. Structure of
the Auctions 108 1.1 Basic Auction Structure 108 1.2 Auctions with Public
Information 112 1.3 Varying Numbers of Bidders 113 1.4 The Experience
Factor 113 2. Theoretical Considerations 114 2.1 Private Information
Conditions 114 2.2 Effects of Public Information 116 2.3 Summary of
Research Questions of Primary Interest 118 3. Experimental Results 119 3.1
Bidding Patterns with Private Information 119 3.2 Effects of Public
Information on Seller's Revenues 127 3.3 Summary of Experimental Outcomes
of Primary Interest 131 4. Toward Generalizability: But Is This How the
Real World Operates? 131 5. Conclusions 134 Notes 136 References 140
Addendum: Benchmark Equilibrium for First-Price Auctions with Public
Information 141 Chapter 4. Comparative Static Effects of Number of Bidders
and Public Information on Behavior in Second-Price Common Value Auctions by
John H. Kagel, Dan Levin, and Ronald M. Harstad 149 1. Introduction 149 2.
Structure of the Auctions 152 2.1 Basic Auction Structure 152 2.2 Auctions
with Public Information 152 2.3 Subject Experience and Varying Numbers of
Bidders 153 3. Theoretical Considerations 154 3.1 Naive Bidding under
Private Information Conditions: A Model of the Winner's Curse 154 3.2 Nash
Equilibrium Bidding under Private Information Conditions 155 3.3 Naive
Bidding under Public Information Conditions 156 3.4 Nash Equilibrium
Bidding under Public Information Conditions 157 4. Experimental Results 160
4.1 Bidding Patterns with Private Information 160 4.2 Effects of Public
Information on Revenue 165 5. Summary and Conclusions 169 Appendix 171
Notes 173 References 175 Chapter 5. Information Impact and Allocation Rules
in Auctions with Affiliated Private Values: A Laboratory Study by John H.
Kagel, Ronald M. Harstad, and Dan Levin 177 1. Introduction 177 2.
Structure of the Auctions 178 2.1 First-Price Auctions 178 2.2
Second-Price/English Auctions 181 2.3 Subjects 181 3. Theoretical
Predictions 182 3.1 First-Price Auctions 182 3.2 Second-Price/English
Auctions 186 4. Experimental Results 187 4.1 First-Price Auctions 187 4.2
Second-Price/English Auctions 197 5. Summary and Conclusions 202 Appendix A
203 Appendix B: Derivation of Risk-Neutral Nash Bid Function 204 Notes 205
References 209 Chapter 6. Revenue Effects and Information Processing in
English Common Value Auctions by Dan Levin, John H. Kagel, and
Jean-François Richard 210 1. Structure of the Auctions 211 2. Theoretical
Considerations 213 2.1 Factors Promoting Revenue Raising in English
Auctions 213 2.2 Forces Inhibiting Revenue Raising in English Auctions 216
3. Experimental Results 217 3.1 Revenue Effects of English Auctions 217 3.2
Bidding Behavior in English Auctions 221 4. Relationship to Field Data 232
5. Summary and Conclusions 232 Appendix A: Derivation of Equilibrium Bid
Functions 234 Appendix B: Full Information Maximum Likelihood Estimates 236
Notes 240 References 243 Chapter 7. Common Value Auctions with Insider
Information by John H. Kagel and Dan Levin 245 1. Structure of the Auctions
246 2. Theoretical Considerations 247 2.1 The Winner's Curse 248 2.2
Auctions with Symmetric Information Structure (SIS) 249 2.3 Auctions with
Asymmetric Information Structure (AIS) 249 3. Experimental Results 251 3.1
Auctions with Inexperienced Bidders 251 3.2 Super-Experienced Bidders 256
3.3 Learning and Adjustments in Insider's Bids over Time 261 4. Summary and
Conclusions 263 Appendix: Increases in Expected Revenue in Auctions with
Insider Information 264 Notes 265 References 268 Chapter 8. Can the Seller
Benefit from an Insider in Common-Value Auctions? by Colin Campbell and Dan
Levin 270 1. Introduction 270 2. The Model 271 2.1 Environments of No
Private Information 272 2.2 Homogeneous Private Information 273 2.3
Heterogeneous Bidders I: Partitioned Information 274 2.4 Heterogeneous
Bidders II: Nonpartitioned Information 275 2.5 Discussion 276 3. Conclusion
281 Appendix 281 Notes 282 References 282 Chapter 9. Second-Price Auctions
with Asymmetric Payoffs: An Experimental Investigation by Christopher Avery
and John H. Kagel 284 1. Introduction 284 2. The Base Model 285 2.1
Equilibrium Analysis 286 2.2 Revenue Comparisons 289 3. Experimental Design
290 4. Experimental Hypotheses 292 5. Experimental Results 295 6. Summary
and Conclusion 304 Appendix 305 Notes 308 References 310 Chapter 10.
Learning in Common Value Auctions: Some Initial Observations by Susan
Garvin and John H. Kagel 311 1. Introduction 311 2. Experimental Design 312
3. Theoretical Considerations: Measures of Learning and Adjustment 315 4.
Experimental Results 316 4.1 The Data to Be Explained: Adjustments in
Bidding over Time in First-Price Auctions 316 4.2 Market Adjustments:
Self-Selection among Returning Bidders 319 4.3 Learning/Adjustment
Mechanisms for Individual Bidders 322 5. Summary 329 Notes 330 References
331 Chapter 11. Cross-Game Learning: Experimental Evidence from First-Price
and English Common Value Auctions by John H. Kagel 332 1. Introduction 332
2. Experimental Procedures and Performance Measures 333 3. Experimental
Results 334 4. Analysis and Conclusions 337 Notes 338 References 339
Chapter 12. A Comparison of Naive and Experienced Bidders in Common Value
Offer Auctions: A Laboratory Analysis by Douglas Dyer, John H. Kagel, and
Dan Levin 340 1. Structure of the Auctions 341 2. Theoretical
Considerations 341 3. Experimental Results 342 3.1 Experiments with N = 4
342 3.2 Effects of Changing N and Public Information 345 4. Conclusion and
Discussion 346 Notes 347 References 348 Chapter 13. Bidding in Common Value
Auctions: How the Commercial Construction Industry Corrects for the
Winner's Curse by Douglas Dyer and John H. Kagel 349 1. Introduction 349 2.
Bidding Structure, Industry Characteristics, and Sample Data 351 3.
Theoretical Considerations 351 4. Bid Distribution Characteristics of
Sample Data 354 5. Differences in Auction Structure between Theory and
Practice 358 5.1 Mechanisms for Escaping the Winner's Curse 359 5.2
Avoiding the Winner's Curse: Situation-Specific Learning 361 5.3 Private
Value/Chance Elements in Bidding 361 6. Industry-Specific Characteristics
and Their Relationship to Auction Theory 362 7. Summary and Conclusions 364
Appendix: Variation in Subcontractor Bids to General Contractors 365 Notes
368 References 368 Instructions 370 Index 395

Rezensionen

I know of no book that offers such a comprehensive treatment of theory and experiments in common value auctions. The papers it brings together represent very significant contributions to both auction theory and auction behavior and are of the highest quality.