Common Value Auctions and the Winner's Curse

John H. Kagel, Dan Levin

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English

Princeton University Press
22 October 2002

Economics; Retail sector

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.

By: John H. Kagel, Dan Levin
Imprint: Princeton University Press
Country of Publication: United States
Dimensions: Height: 235mm, Width: 152mm, Spine: 26mm
Weight: 794g
ISBN: 9780691016672
ISBN 10: 0691016674
Pages: 424
Publication Date: 22 October 2002
Audience: Professional and scholarly , College/higher education , Undergraduate , Primary
Format: Hardback
Publisher's Status: Active

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.

Reviews for Common Value Auctions and the Winner's Curse

""This book shows that the kind of winner's curse at issue is pervasive across various types of auctions and is not eliminated by experience or even by using expert bidders. One of its main contributions is the specification of naïve bidding models that explain patterns of deviations from (Nash) theoretical predictions. The ex post perspectives about how to improve experimental designs and procedures for dealing with bankruptcies were particularly interesting.""—Charles A. Holt, University of Virginia ""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.""—Douglas Davis, Virginia Commonwealth University