On the informational inefficiency of discriminatory price auctions |
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Authors: | Matthew O Jackson Ilan Kremer |
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Institution: | a Division of the Humanities and Social Sciences 228-77, California Institute of Technology, Pasadena, CA 91125, USA b Graduate School of Business, Stanford University, Stanford, CA 94305, USA |
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Abstract: | We analyze bidding behavior in large discriminatory-price auctions in a common value setting where the number of objects is a non-trivial proportion of the number of bidders. We show that the average price paid in the auction is biased downward from the expected value of the objects, even in the competitive limit. We show that conditional on a signal that falls below a threshold, a bidder bids no more than the expected value of an object conditional on the signal and winning; while conditional on any signal that lies above the threshold the bid is strictly lower than the expected value conditional on the signal and winning. |
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Keywords: | D44 C72 D41 G14 |
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