Impact of valuation ranking information on bidding in first-price auctions: A laboratory study

Alexander Elbittar
2009 Journal of Economic Behavior and Organization  
Landsberger et al. (2001) identi...ed optimal bidder behavior in ...rst-price private-value auctions when the ranking of valuations is common knowledge, and derived comparative-statics predictions regarding the auctioneer's expected revenue and the e¢ ciency of the allocation. The experiment reported here tests the behavioral components of these comparative-statics predictions. The results support the prediction that buyers are inclined to bid more aggressively when they learn they have the low
more » ... value. Contrary to the theory, buyers are inclined to bid less when they learn they have the high value. Once information is revealed, bidders tend to move toward better responses, exploiting new economic opportunities. Consistent with theory, the overall proportion of e¢ cient allocations is lower than in the ...rst-price auction before information is revealed. But as a result of high-value bidders decreasing their bids, the expected revenue does not increase on a regular basis, contrary to the theory's predictions.
doi:10.1016/j.jebo.2008.09.006 fatcat:h42233qp4rhohcpwr24appp25y