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Common-Value Auctions

In: Auction Theory

Author

Listed:
  • Pak-Sing Choi

    (National Central University)

  • Felix Munoz-Garcia

    (Washington State University)

Abstract

This chapter examines auctions where all bidders share the same (common) value for the object, but none of them observe an accurate signal of the object’s true valuation. Instead, every bidder privately observes a noisy signal about the object’s value and, based on this signal, submits a bid. This model is typically used to analyze the auctioning of oil leases, as firms exploiting the oil reservoir would earn a similar profit if they win the auction, but they have imprecise and potentially different signals of the amount of oil barrels in the reservoir (as they receive different engineering reports) and, as a consequence, hold different estimates of the oil lease’s profitability.

Suggested Citation

  • Pak-Sing Choi & Felix Munoz-Garcia, 2021. "Common-Value Auctions," Springer Texts in Business and Economics, in: Auction Theory, chapter 7, pages 205-224, Springer.
    • Handle: RePEc:spr:sptchp:978-3-030-69575-0_7
    DOI: 10.1007/978-3-030-69575-0_7
    as

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