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Unformatted text preview: Common Value Auctions So far we have studied auctions for which bidders have private values. In private value auctions each bidder knows how much she values the item, and this value is her private information. Now we will discuss common value auctions. In common value auctions, the actual value of the item for sale is the same for everyone, but bidders have different private information about what that value is. Examples of common value auctions include Treasury bill auctions, auctions of timber, spectrum auctions, and auctions of oil and gas leases. Rod Garratt Auction Theory With Experiments In common value auctions the bidders are often subject to the winners curse. Winners curse: In a common value auction the bidder with the best (most optimistic) information wins. A bidder who fails to take this into account pays, on average, more than the item is worth. However, the winners curse also results in common value auctions when bidders fail to account for the way private information influences the...
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This note was uploaded on 12/26/2011 for the course ECON 177 taught by Professor Garratt during the Fall '09 term at UCSB.
- Fall '09