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The nature of information and its effect on bidding behavior: Laboratory evidence in a first price common value auction

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  • Brocas, Isabelle
  • Carrillo, Juan D.
  • Castro, Manuel

Abstract

We study in the laboratory a series of first price sealed bid auctions of a common value good. Bidders face three types of information: private information, public information and common uncertainty. Auctions are characterized by the relative size of these three information elements. Only half of our subjects bid differently depending on whether the last piece of information obtained is private or public but they do not react to each type of information as predicted by theory. The other half of the subjects do not distinguish between private and public information and either consistently underbid or consistently overbid.

Suggested Citation

  • Brocas, Isabelle & Carrillo, Juan D. & Castro, Manuel, 2015. "The nature of information and its effect on bidding behavior: Laboratory evidence in a first price common value auction," Journal of Economic Behavior & Organization, Elsevier, vol. 109(C), pages 26-40.
    • Handle: RePEc:eee:jeborg:v:109:y:2015:i:c:p:26-40
    DOI: 10.1016/j.jebo.2014.10.015
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    1. Brocas, Isabelle & Carrillo, Juan D. & Castro, Manuel, 2017. "Second-price common value auctions with uncertainty, private and public information: Experimental evidence," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 67(C), pages 28-40.
    2. Ninoslav Malekovic & Lazaros Goutas & Juliana Sutanto & Dennis Galletta, 2020. "Regret under different auction designs: the case of English and Dutch auctions," Electronic Markets, Springer;IIM University of St. Gallen, vol. 30(1), pages 151-161, March.
    3. Andrea Albertazzi & Friederike Mengel & Ronald Peeters, 2021. "Benchmarking information aggregation in experimental markets," Economic Inquiry, Western Economic Association International, vol. 59(4), pages 1500-1516, October.

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    More about this item

    Keywords

    Laboratory experiments; Common value auctions; Winner's curse;
    All these keywords.

    JEL classification:

    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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