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Theories and Tests of "Blind Bidding" in Sealed-Bid Auctions

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  • Robert Forsythe
  • R. Mark Isaac
  • Thomas R. Palfrey

Abstract

In this article we report the results from a series of laboratory markets in which sellers have better information about the quality of an item than any of the potential buyers. Sellers may voluntarily choose to reveal this information or they may instead decide to "blind bid" the item. We find that a sequential equilibrium model where buyers "assume the worst" is a good predictor of behavior in these simple markets. This equilibrium is not instantaneously attained, however, but there is an unravelling process which describes how this equilibrium is approached. At the conclusion of the market, allocations tend to be fully efficient, ex post.

Suggested Citation

  • Robert Forsythe & R. Mark Isaac & Thomas R. Palfrey, 1989. "Theories and Tests of "Blind Bidding" in Sealed-Bid Auctions," RAND Journal of Economics, The RAND Corporation, vol. 20(2), pages 214-238, Summer.
    • Handle: RePEc:rje:randje:v:20:y:1989:i:summer:p:214-238
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