Decision Sciences
7 years ago

Uninformed bidders dramatically underbid in common-value auctions, impacting auction outcomes.

Games and Economic Behavior
An experiment on first-price common-value auctions with asymmetric information structures: The blessed winner
Brit Grosskopf, Lucas Rentschler, Rajiv Sarin

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The experiment studied how bidders behave in auctions when some have private information and others don't. Uninformed bidders tend to bid too low, while informed bidders often bid too high when there are only two bidders. This shows that having the right information is crucial in auctions.