Data-driven bidders in auctions may lead to inefficiencies and suboptimal outcomes.
The article explores how novice bidders in auctions can make suboptimal decisions when using data from past auctions to estimate the value of items. The researchers found that in auctions where bidders can only submit one-dimensional bids, mixing experienced and data-driven bidders leads to inefficiencies, especially when there are correlations in the signal distribution. This inefficiency extends to various auction-like mechanisms, affecting the overall outcome of the auctions.