The loser's curse and information aggregation in common value auctions

Wolfgang Pesendorfer; Jeroen M. Swinkels

doi:10.2307/2171736

The loser's curse and information aggregation in common value auctions

Wolfgang Pesendorfer, Jeroen M. Swinkels

Economics

Research output: Contribution to journal › Article › peer-review

103 Scopus citations

Abstract

We consider an auction in which k identical objects of unknown value are auctioned off to n bidders The k highest bidders get an object and pay the k + 1st bid. Bidders receive a signal that provides information about the value of the object. We characterize the unique symmetric equilibrium of this auction. We then consider a sequence of auctions A_r with n_r bidders and k_r objects. We show that price converges in probability to the true value of the object if and only if both k_r → ∞ and n_r - k_r → ∞, i.e., both the number of objects and the number of bidders who do not receive an object go to infinity.

Original language	English (US)
Pages (from-to)	1247-1281
Number of pages	35
Journal	Econometrica
Volume	65
Issue number	6
DOIs	https://doi.org/10.2307/2171736
State	Published - Nov 1997

All Science Journal Classification (ASJC) codes

Economics and Econometrics

Keywords

Common value auctions
Information aggregation

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10.2307/2171736

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AB - We consider an auction in which k identical objects of unknown value are auctioned off to n bidders The k highest bidders get an object and pay the k + 1st bid. Bidders receive a signal that provides information about the value of the object. We characterize the unique symmetric equilibrium of this auction. We then consider a sequence of auctions Ar with nr bidders and kr objects. We show that price converges in probability to the true value of the object if and only if both kr → ∞ and nr - kr → ∞, i.e., both the number of objects and the number of bidders who do not receive an object go to infinity.

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The loser's curse and information aggregation in common value auctions

Abstract

All Science Journal Classification (ASJC) codes

Keywords

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