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Deciding between the Common and Private Values Paradigm: An Application to Experimental Data

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  • Olivier Armantier

    (State University of New York-Stony Brook, USA)

Abstract

In the application of auction theory to the real world, practitioners must choose ex ante which of the common value or the private values paradigm applies. Since intuition may fail, some authors have proposed to decide statistically between the two models. These studies, however, did not confirm whether the tests validated the true model since field data were used. I propose to use experimental data as well as Monte-Carlo simulations to study different nonstructural rules to decide between the two paradigms. I find that regressions are inconclusive whereas a nonparametric procedure seems to be powerful and robust. Copyright Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association

Suggested Citation

  • Olivier Armantier, 2002. "Deciding between the Common and Private Values Paradigm: An Application to Experimental Data," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 43(3), pages 783-801, August.
    • Handle: RePEc:ier:iecrev:v:43:y:2002:i:3:p:783-801
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    Cited by:

    1. Antonio Merlo & Thomas R. Palfrey, 2018. "External validation of voter turnout models by concealed parameter recovery," Public Choice, Springer, vol. 176(1), pages 297-314, July.
    2. Peter Boatwright & Sharad Borle & Joseph B. Kadane, 2010. "Common Value vs. Private Value Categories in Online Auctions: A Distinction Without a Difference?," Decision Analysis, INFORMS, vol. 7(1), pages 86-98, March.
    3. Paul Pezanis-Christou & Andres Romeu, 2016. "Structural Analysis of First-Price Auction Data: Insights from the Laboratory," School of Economics and Public Policy Working Papers 2016-17, University of Adelaide, School of Economics and Public Policy.
    4. Paul Klemperer, 2007. "Bidding Markets," Journal of Competition Law and Economics, Oxford University Press, vol. 3(1), pages 1-47.

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