June 29th, 2017

Dan Levin (Ohio State)

Abstract:

We study how subjects with identical public data first make estimates and then bid in common-value environments. The data presented rows of numbers and values associated with them by our (undisclosed) rule. Subjects were asked to estimate the last-row value with only the numbers given, and then bid for that value in a second-price auction. Here there is no presumption of commonly-known distributions, yet we derive necessary conditions for equilibrium. The strong winner’s curse we found results from the dispersion of the value estimates and the poorly-chosen bid-strategies.  Finally, the nearest-neighbors method explains well the estimates of the (common) value.