Independent Private Value Auctions Bidder Behavior

Independent Private Value Auctions Bidder Behavior - Andrew...

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Andrew Rapaport 2/24/09 Econ 505 Independent Private Value Auctions: Bidder Behavior in First-, Second-, and Third-Price Auctions With Varying Number of Bidders A well known theoretical result for IPV auctions is the Revenue- Equivalence Theorem: English, Dutch, first- and second-price auctions yield the same expected revenue for risk neutral bidders. More basic than this is that second- price and English auctions are strategically, along with first-price and Dutch auctions, so that these methods produce the same expected revenue even in the absence of risk neutrality. Experiments have shown failures of the second-price and English and of first-price and Dutch auctions. These results bring up questions about the validity of Nash equilibrium bidding theory as a descriptive model of auction behavior. This paper goes into detail about whether or not if bidding in strategically equivalent auctions represents some kind of uncontrolled element in the environment or if in bidder’s utility functions that cause higher bids in sealed bid auctions. Or do they involve breakdowns in Nash equilibrium bidding theory. A way to sort out what this variable is, is to hold an experiment with sealed bid and open outcry auctions and examining the predictive properties of the theory. This is done by examining the comparative static effects of changing sealed bid price
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This note was uploaded on 06/09/2009 for the course ECON 505 taught by Professor Brad during the Spring '09 term at Ohio State.

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Independent Private Value Auctions Bidder Behavior - Andrew...

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