aggregation of information in large cournot markets consider a homogeneous product market where firms have private information about an uncertain demand parameter and compete in quantities we examine the convergence properties of bayesian cournot equilibria as the economy is replicated and conclude that large cournot or almost competitive markets do not aggregate information efficiently except possibly when the production technology exhibits constant returns to scale even in a competitive market there is a welfare loss with respect to the first best outcome due to incomplete information in general nevertheless a competitive market is efficient taking as given the decentralized private information structure of the economy endogenous and costly information acquisition is examined and seen to imply that the market outcome always falls short of the first best level with decreasing returns to scale the results are also shown to be robust to the addition of extra rounds of competition which allows firms to use the information revealed by past prices explicit closed form solutions yielding comparative static results are obtained for models characterized by quadratic payoffs and affine information structures

effects of information revelation policies under market structure uncertainty geographically dispersed sellers in electronic reverse marketplaces such as those hosted by market makers like ariba are uncertain about the number of competitors they face in any given market session we refer to this uncertainty about the number of competitors as market structure uncertainty over the course of several market sessions sellers learn about the competitive nature of the marketplace how they learn to reduce the market structure uncertainty depends on the market transparency scheme or the revelation policy adopted a revelation policy determines the extent to which information the number of sellers in a session their bidding patterns etc is revealed to sellers because these policies control what sellers learn and how they bid in future sessions they determine buyer surplus possibly because market structure uncertainty is more prevalent in information technology enabled marketplaces than traditional ones prior work has not addressed the impact of revelation policies on this type of uncertainty currently there is little guidance available to buyers in choosing the appropriate revelation policy to address this information technology enabled problem we use game theory to compare the buyer surplus generated under a set of revelation policies commonly used in electronic reverse marketplaces we demonstrate that the policy that generates the least amount of market structure uncertainty for the sellers always maximizes buyer surplus we further investigate to provide intuition regarding how bidders reactions to overcome uncertainty differs with the nature of uncertainty and how those reactions impact buyer surplus

collusion and signaling in auctions with interdependent values abstract the standard approach to collusion in auctions posits an uninformed disinterested third party who prior to the auction designs and implements a collusive mechanism in environments where collusion agreements are likely to be both proposed and executed by the involved parties this approach may neglect information leakages from simply a proposal to collude we consider a model of collusion where one informed bidder proposes to another as in es and schummer 2004 we allow for general interdependent values and affiliated signals in contrast to third party modeling approaches collusion is inefficient from both a social perspective except for the case of pure common values and from the perspective of the ring both bidders are better off than without colluding but the surplus extracted from the seller is distributed asymmetrically between the bidders the potential for information leakage from proposing is bad for low types who reveal that they are weak competitors but is advantageous for high types because they are able to signal their strength we identify a so called briber s curse whereby acceptance of a proposal causes the proposer to downgrade her expected value for the object when there is additional competition in the form of bidders outside of the cartel the briber s curse significantly harms cartel profits and raises seller revenues

competitive rational expectations equilibria without apology abstract consider a financial market with n risk averse asymmetrically informed traders when n grows at the same rate as noise trading prices in competitive and in strategic rational expectations equilibrium converge to each other at a rate of 1 n equilibria in the two scenarios are close when noise trading volume per informed trader is large in relation to risk bearing capacity both equilibria converge to the competitive equilibrium of a limit continuum economy as the market becomes large at a slower rate of 1 n the results extend to endogenous information acquisition and the connections with the grossman stiglitz paradox are highlighted

self fulfilling mechanisms and rational expectations we introduce a class of communication equilibria which we call self fulfilling mechanisms and show that they provide a game theoretic foundation to rational expectations equilibria letebe an exchange economy with differential information we associate a strategic market game e withe we prove that the allocations achieved through a self fulfilling mechanism in e coincide with the rational expectations equilibrium allocations ine in order to understand how self fulfilment can be realized in a dynamic framework we investigate the relationship between self fulfilling mechanisms in e and nash equilibria of thet stage repeated game t e journal of economic literatureclassification numbers d82 c72

all equilibria of the multi unit vickrey auction abstract this paper completely characterizes the set of equilibria of the vickrey auction for multiple identical units when buyers have non increasing marginal valuations and there are at least three potential buyers there are two types of equilibria in the first class of equilibria there are positive bids below the maximum valuation in this class above a threshold value all bidders bid truthfully on all units one of the bidders bids at the threshold for any unit for which his valuation is below the threshold the other bidders bid zero in this range in the second class of equilibria there are as many bids at or above the maximum valuation as there are units the allocation of these bids is arbitrary across bidders all the remaining bids equal zero with any positive reserve price equilibrium becomes unique bidders bid truthfully on all units for which their valuation exceeds the reserve price

price quantity strategic market games this paper is yet another in a rapidly growing series e g 2 11 on strategic approaches to economic equilibrium our aim here is to make precise the remark implicitly due to bertrand 1 or 10 ch 4 5 that if the agents in an economy use price setting strategies then the strategic nash equilibria will in fact be walrasian and this without any assumption of a large number of small agents however in our models not only prices but also quantities are set by the agents thus it might actually be more appropriate to call them bertrand cournot types of models we begin with a standard walras exchange economy with a finite number of traders and commodities this is recast as a game in strategic form in essentially two different ways there is a trading post for each commodity to which traders send contingent statements about how much they wish to buy and sell and at what prices in model 1 the trading point is determined by the intersection of the aggregate supply and demand curves in model 2 trade takes place so as to meet as many contingent statements as possible each buyer whose orders are filled pays the price he quoted using a fiat money which can be borrowed costlessly and limitlessly but after trade is over there is a settlement of accounts and a penalty is levied on those who are bankrupt no attempt is made to model the penalty in any detail it is simply described in the form of a disutility but this in turn may be imagined to stem from confiscation of assets see remark 5 or the necessity of procuring highly priced loans etc call a noncooperative equilibrium active if it turns out that no trader is isolated i e trapped as the sole buyer or seller at some trading post then our results may be described as follows in model 1 the active2 n e of the game coincide with the c e of the market furthermore there is a subset of tight active n e which also coincide with the c e and each n e in this subset is strong

the relevance of a choice of auction format in a competitive environment we examine the relevance of an auction format in a competitive environment by comparing uniform and discriminatory price auctions with many bidders in a private values setting we show that if the number of objects for sale is small relative to the number of bidders then all equilibria of both auctions are approximately efficient and lead to approximately the same revenue when the number of objects for sale is proportional to the number of bidders then the particulars of the auction format matter all equilibria of the uniform auction are efficient while all of the equilibria of the discriminatory auction are inefficient the relative revenue rankings of the auction formats can go in either direction depending on the specifics of the environment these conclusions regarding the efficiency and revenue ranking are in contrast to the previous literature which focused on the case of independent information across agents

equilibrium price formation and the value of private information an economy is analyzed in which agents first choose whether to acquire costly information about the return to a risky asset and then choose demand functions that determine the allocation of assets it is a well known paradox that if agents are price takers and prices are fully revealing then an equilibrium with costly information acquisition does not exist it is shown that if the price formation process is modeled explicitly and agnets are not price takers then it is possible to have an equilibrium with fully revealing prices and costly information acquisition article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

discounted stochastic games with no stationary nash equilibrium two examples we present two examples of discounted stochastic games each with a continuum of states finitely many players and actions that possess no stationary equilibria the first example has deterministic transitions an assumption undertaken in most of the early applications of dynamics games in economics and perfect information and does not possess even stationary approximate equilibria or markovian equilibria the second example satisfies in addition to stronger regularity assumptions that all transitions are absolutely continuous with respect to a fixed measure an assumption that has been widely used in more recent economic applications this assumption has been undertaken in several positive results on the existence of stationary equilibria in special cases and in particular guarantees the existence of stationary approximate equilibria

effects of carbon taxes in an economy with prior tax distortions an intertemporal general equilibrium analysis abstract this paper analyzes the costs of carbon taxes in a model that recognizes interactions between this tax and pre existing taxes first we examine the extent to which costs of a u s carbon tax are reduced when its revenues finance cuts in income taxes such use of revenues significantly reduces but does not eliminate the overall policy costs the positive overall costs reflect the carbon tax s focus on intermediate inputs and its relatively narrow base in comparison with income taxes we also examine the sensitivity of the carbon tax s costs to the level of pre existing taxes for any given use of revenues welfare costs rise significantly with pre existing tax rates indicating that models disregarding pre existing taxes may substantially understate the costs of new environmental tax initiatives

tail expectation and imperfect competition in limit order book markets abstract perfect competition in liquidity provision in limit order markets is characterized by a tail expectation condition glosten 1994 in this paper we model imperfect competition in schedules by infinitely many liquidity suppliers quoting on a limit order book we show that there are zero rent mixed strategy equilibria featuring finite numbers of active liquidity suppliers none of the equilibria satisfies the competitive outcome not even on average considering a sequence of equilibria with the number of active liquidity suppliers becoming large we show that the aggregate stochastic marginal price schedule converges to the deterministic competitive marginal price schedule

all equilibria of the vickrey auction abstract this paper characterizes the set of nash equilibria in the second price sealed bid auction with independent private values and three or more bidders in addition we show that any effective reserve price implies uniqueness

revenue ranking of discriminatory and uniform auctions with an unknown number of bidders an important managerial question is the choice of the pricing rule we study whether this choice depends on the uncertainty about the number of participating bidders by comparing expected revenues under discriminatory and uniform pricing within an auction model with affiliated values stochastic number of bidders and linear bidding strategies we show that if uncertainty about the number of bidders is substantial then the discriminatory pricing generates higher expected revenues than the uniform pricing in particular the first price auction might generate higher revenues than the second price auction therefore uncertainty about the number of bidders is an important factor to consider when choosing the pricing rule we also study whether eliminating this uncertainty i e revealing the number of bidders is in the seller s interests and discuss the existence of an increasing symmetric equilibrium

lechatelier effects for the competitive firm under price uncertainty lechatelier effects confirm the intuition that constrained decisions are not only suboptimal but also restrained in the sense of being less elastic samuelson 1947 introduced this idea into economics and showed that it blends neatly with economic models of decision making under certainty being particularly well suited to the competitive firm as emphasized by silberberg 1971 linearity of the objective function combines with convexity in the constraint imposed by the production technology to yield envelope results at the first order and lechatelier effects at the second as powerful consequences of the maximization hypothesis the envelope results of primary interest in producer theory shephard s lemma for cost functions and hotelling s lemma for profit functions are equality relations reflecting the firstorder stationarity of an optimum lechatelier effects in contrast are inequality relations reflecting the restrained nature of short run responses compared with long run less constrained responses thus the quantities of labor demanded and output supplied are more elastic with respect to wage rate and output price changes in the long run than in the short run these lechatelier predictions pertain to a firm that has fully adjusted to an exogenous set of factor and output prices and thus apply only in the neighborhood of a long run equilibrium configuration for the firm however they apply equally well whether capital and labor are substitute or complementary factors of production milgrom and roberts 1996 have established a global lechatelier principle under the assumption that capital and labor are always substitutes or always complements in production a stipulation that is necessarily true for the infinitesimal changes contemplated in the local lechatelier predictions when the firm makes decisions while facing uncertainty about output price risk preferences influence behavior if the uncertainty cannot be fully diversified through futures contracts or the sale of ownership shares as in the case of closely held family businesses such as some of those

certification and market transparency we provide elementary insights into the effectiveness of certification to increase market transparency in a market with opaque product quality sellers use certification as a signaling device while buyers use it as an inspection device this difference alone implies that seller certification yields more transparency and higher social welfare under buyer certification profit maximizing certifiers further limit transparency but because seller certification yields larger profits active regulation concerning the mode of certification is not needed these findings are robust and widely applicable to for instance patents automotive parts and financial products

bidder solicitation adverse selection and the failure of competition we study a common value first price auction in which the number of bidders is endogenous the seller auctioneer knows the value and solicits bidders at a cost the number of bidders which is unobservable may thus depend on the true value therefore being solicited conveys information this solicitation effect may soften competition and impede information aggregation under certain conditions there is an equilibrium in which the seller solicits many bidders yet the resulting price is not competitive and fails to aggregate any information more broadly these ideas are relevant for markets with adverse selection in which informed traders initiate contacts

on the informational inefficiency of discriminatory price auctions we analyze bidding behavior in large discriminatory price auctions where the number of objects is a non trivial proportion of the number of bidders bidders observe private signals that are affiliated with the common value we show that the average price in the auction is biased downward from the expected value of the objects even in the competitive limit in particular we show that conditional on relatively low signals bidders bid the expected value of the objects conditional on their information and winning while bids at higher signals flatten out and are below the expected value conditional on winning

toward a strategic foundation for rational expectations equilibrium a step toward a strategic foundation for rational expectations equilibrium is taken by considering a double auction with n buyers and m sellers with interdependent values and affiliated private information if there are sufficiently many buyers and sellers and their bids are restricted to a sufficiently fine discrete set of prices then generically there is an equilibrium in nondecreasing bidding functions that is arbitrarily close to the unique fully revealing rational expectations equilibrium of the limit market with unrestricted bids and a continuum of agents in particular the large double auction equilibrium is almost efficient and almost fully aggregates the agents information

efficient investments in the implementation problem abstract this paper identifies a condition for an efficient social choice rule to be fully implementable when we take into account investment efficiency to do so we extend the standard implementation problem to include endogenous ex ante and ex post investments in our problem the social planner aims to achieve efficiency in every equilibrium of a dynamic game in which agents strategically make investments before and after playing the mechanism our main theorem shows that a novel condition commitment proofness is sufficient and necessary for an efficient social choice rule to be implementable in subgame perfect equilibria the availability of ex post investments is crucial in our model there is no social choice rule that is efficient and implementable in subgame perfect equilibria without ex post investments we also show that our positive result continues to hold in the incomplete information setting

rational expectations information acquisition and competitive bidding most rational expectations market equilibrium models are not models of price formation and naive mechanisms leading to such equilibria can be severely manipulable in this paper a bidding model is developed which has the market like features that bidders act as price takers and that prices convey information higher equilibrium prices convey more favorable information about the quality of the objects being sold than do lower prices bidders can benefit from trading only if they have a transactions motive or if they have access to inside information apart from exceptional cases prices are not fully revealing a two stage model is developed in which bidders may acquire information at a cost before bidding and for which the equilibrium price is fully revealing resolving a well known paradox

monopoly behaviour decentralized regulation and contestable markets an experimental evaluation this study provides a comparative experimental evaluation of several alternative approaches to the single product monopoly problem we contrast incentive compatible decentralized regulatory mechanisms with notions of market contestability in a decreasing cost environment the decentralized regulatory mechanisms are found to be significantly more effective at restraining monopoly power than is allowing direct contestability but the regulatory mechanisms examined require that the regulatory agency know the market demand curve though not the industry cost curve since this is significantly more information than is required to implement direct contestability an interesting tradeoff is suggested does the greater efficiency in monopoly restraint provided by the regulatory mechanism relative to direct contestability outweigh the former s greater informational requirements

endogenous private information structures we formally incorporate the option to gather information into a game and thus endogenize the information structure we ask whether models with exogenous information structures are robust with respect to this endogenization any nash equilibrium of the game with information acquisition induces a nash equilibrium in the corresponding game with an exogenous structure we provide sufficient conditions on the structure of the game for which this remains true when nash is replaced by sequential we characterize the sequential nash equilibria of games with exogenous information structures that can arise as a sequential nash equilibrium of games with endogenous information acquisition

equilibrium in sealed high bid auctions there is a voluminous theoretical literature on sealed high bid auctions auctions in which bids are sealed and the high bidder pays his bid see for example vickrey 1961 myerson 1981 riley and samuelson 1981 milgrom and weber 1982 matthews 1983 maskin and riley 1984 holt 1980 cox smith and walker 1988 a critical property on which this literature relies is the existence of equilibrium in which buyers bidding strategies are monotonic in their types this enables the analyst to perform comparative statics as the distribution of types changes and to compare the welfare properties of the high bid auction with those of other auction institutions one case in which the existence of monotonic equilibrium is readily established is that in which buyers types are distributed smoothly independently and symmetrically in this case there exists a symmetric equilibrium one in which all bidders share the same bidding behaviour as a function of their valuations and this bid function is the solution to a first order differential equation

information aggregation and manipulation in an experimental market prediction markets are increasingly being considered as methods for gathering summarizing and aggregating diffuse information by governments and businesses alike critics worry that these markets are susceptible to price manipulation by agents who wish to distort decision making we study the effect of manipulators on an experimental market we find that manipulators are unable to distort price accuracy subjects without manipulation incentives compensate for the bias in offers from manipulators by setting a different threshold at which they are willing to accept trades

optimal reservation prices in auctions the risk neutral independent private values ipv auction model produces curious results regarding the use of reservation prices no matter how many bidders the seller should announce a fixed reservation price above his true value this is notable since the seller gains by adopting an inefficient institution and puzzling because it conflicts with common practice the authors relax the ipv assumption characterize optimal reservation prices in a richer class of auctions and show that when information is correlated the seller s optimal reservation price converges to his true value often monotonically and rapidly as the number of bidders grows copyright 1996 by royal economic society

irrationality in english auctions abstract this paper explores the effects of a particular form of irrational behaviour by participating bidders in a common value english auction we allow bidders to update their expected valuation of the good as the current price increases assuming that their opponents always play the symmetric nash equilibrium when only one bidder adopts this type of behaviour it is ambiguous whether the final auction price is higher or lower than at the symmetric equilibrium however when both bidders behave irrationally the final auction price is never lower than the symmetric equilibrium provided bidders match their strategies

equilibria in open common value auctions abstract a sufficient condition for uniqueness of nash equilibrium in second price common value auctions is identified we establish that there exists a continuum of equilibria in irrevocable exit common value auctions for the case of two bidders we provide plausible sufficient conditions under which the expected seller revenue is maximized at the symmetric equilibrium an example in which the auctioneer s revenue at the symmetric equilibrium in a second price auction is strictly greater than the revenue at many asymmetric equilibria in the corresponding irrevocable exit auction is provided

uncertainty resolution private information aggregation and the cournot competitive limit a cournot model of oligopoly in which otherwise identical firms have private differential information about the common cost of production and a shared but unknown demand curve is examined a bayesian equilibrium of the corresponding game of incomplete information is solved for explicitly and analysed in the symmetric equilibrium different firms produce at different output levels because they have different information because the information individual firms have is random total output and hence market price is also random for any finite number of firms the main result of the paper relates to the asymptotic properties of the equilibrium when the number of firms becomes large under fairly general conditions on the joint distribution of demand and individual firms information about demand the random equilibrium price converges almost surely to a constant in the limit more importantly this price equals the perfectly competitive price in other words in large markets even if no firm knows the true market demand curve and firms are not price takers and do not use price as a signal to improve their information the competitive price will prevail with certainty in the limit aggregate outcomes are as if all firms shared their private information with each other

entry coordination and auction design with private costs of information acquisition i introduction in most auction literature bidders are passively endowed with private information about their valuations the analysis then focuses on optimal elicitation of private information on many occasions bidders may instead have to incur costs to collect this information 1 auction design in these cases has to balance between information acquisition and information elicitation which are interdependent the performance of an auction depends not only on the bidding equilibrium but also crucially on the information acquisition equilibrium 2 as a salient feature auction design with information acquisition costs has been complicated by entry coordination among bidders due to multiple entry equilibria issue in a symmetric independent private value ipv setting of mcafee and mcmillan 1987 with fixed information acquisition cost levin and smith 1994 note that the ex ante efficient and revenue maximizing auction a second price auction with no entry fee and no reserve induces many asymmetric entry equilibria other than the targeted symmetric one the existence of asymmetric entry equilibria in this setup fundamentally lies in bidders constant marginal cost of entry 3 information acquisition costs could be private information of bidders just as with their private information about values for example in the cases of construction procurements or u s timber auctions many aspects of prebid information acquisition and analyzation are private knowledge of bidders 4 clearly when information acquisition costs are private information of bidders auction design has to additionally take into account information elicitation at the information acquisition stage this aspect of analysis has yet to be reflected in the literature while the case with fixed information acquisition costs has been thoroughly studied by milgrom 1981 mcafee and mcmillan 1987 engelbrecht wiggans 1987 1993 harstad 1990 levin and smith 1994 mcafee quan and vincent 2002 ye 2004 2007 and cremer spiegel and zheng 2009 among others a widely recognized insight of these studies is that ex ante efficiency can be achieved through a second price auction while setting the reserve at the seller s valuation if ex ante entry fees can be used to extract all the expected surplus of bidders then there is a congruence between the revenue and total surplus 5 this article advances this line of research by studying the implications of private acquisition costs on auction design with an emphasis on bidders coordination at the information acquisition stage specifically we consider the ipv setting of mcafee and mcmillan 1987 and levin and smith 1994 while allowing the information acquisition costs to be bidders private information which follow a continuous distribution in light of our previous discussion this article attempts to answer the following questions 1 how are ex ante efficient and revenue maximizing auctions affected by this additional dimension of private information in other words how does information rent extraction at the entry stage affect the auction designs 2 can this private information alleviate rather than aggravate the problem of entry coordination with the dispersion in private information acquisition costs the multiplicity of entry equilibria arising from the constant marginal cost in levin and smith 1994 might be avoidable the types with higher information acquisition costs must have less incentive to enter which could reduce the number of entry equilibria the questions are will sufficient dispersion coordinate bidders and induce a unique entry if yes how much dispersion is enough due to the potential multiplicity of entry equilibria for any given mechanism it is rather difficult to compare performances across varieties of mechanisms to overcome this difficulty we come up with an alternative approach our analysis begins with characterizing efficient and revenue maximizing auctions for any given feasible entry pattern which can be described through a vector of bidders entry thresholds of acquisition costs

efficiency of experimental security markets with insider information an application of rational expectations models the study reports on the ability of competing models of market information integration and dissemination to explain the behavior of simple laboratory markets for a one priced security returns to the security depended upon a randomly drawn state of nature some agents insiders whose identity was unknown to other agents knew the state before the markets opened with replication of market conditions the predictions of a fully revealing rational expectations model are relatively accurate prices adjusted immediately to near rational expectations prices profits of insiders were virtually indistinguishable from non insiders and efficiency levels converged to near 100 percent

equilibrium transformations and the revenue equivalence theorem i develop a method that transforms an equilibrium strategy profile from one auction to another the method is constructive and does not require complicated computation this provides a new approach to revenue equivalence and extends the theorem to domains where it had not previously been known in particular to simultaneous multiple object auctions with complete information and to auction environments having correlated private values and common values

optimality and the english and second price auctions with resale abstract in the presence of resale and under more general assumptions than zheng s 2002 implementation of myerson s 1981 optimal allocation with two bidders is achieved through the second price auction in a special class of asymmetric n bidder models it is achieved through the english auction

first price common value auctions bidder behavior and the winner s curse first price common value auctions bidder behavior and the winners curse john h kagel dan levin raymond c battalio and donald j meyer experimental auction markets are characterized by a strong winner s curse in early auction periods as high bidders consistently lose money failing to account for the adverse selection problem inherent in winning the auction with experience and bankruptcy on the part of the worst offenders subjects earn positive average profits but these are far below nash equilibrium predictions as a sizable minority of bids exceed the expected value of the item conditional on having the highest estimate of value individual bidding behavior is explored to identify the mechanism whereby market outcomes no longer display the worst effects of the winner s curse i introduction numerous occurrences of the winner s curse have been reported in bidding for items of uncertain value resulting in below normal or even negative average profits for bidders the winner s curse results from bidders failure to account for the adverse selection problem inherent in winning auctions for items of uncertain value capen clapp and campbell 1971 claim that the winner s curse resulted in low profits for oil companies in the 1960s in bidding on offshore oil and gas leases regarding corporate takeovers and mergers roll 1986 proposes a hubris hypothesis acquiring firms generally fall prey to the winner s curse paying too much on average for their targets he claims that from the samples he has observed the hubris hypothesis explains merger data as well as tax factors synergy or inefficient target management cassing and douglas 1980 find that many baseball players in the free agency market have been overpaid on account of the winner s curse and dessauer 1981 reports a similar finding of overbidding in auctions for the book publishing rights based on these occurrences it appears that many agents are not fully cognizant of the intricacies involved with bidding on alternatives that have uncertain worth the winner s curse results from the fact that although bidders may hold unbiased estimates of the auctioned item s value this estimate can be overly optimistic given that participants bids are influenced by their estimates of value in other words the winner s curse results from an adverse selection problem that bidders fail to account for fully in submitting their bids the existence of a winner s curse implies a breakdown of rational expectations on the bidder s part as discussed by milgrom 1981 and identifies a market that is out of equilibrium a winner s curse need not result from bidding on items with uncertain value provided proper adjustments are made one adjustment to the adverse selection problem is to deflate the expected value of the item and hence the bid before any action is taken for example cox and isaac 1984 show that agents who maximize expected utility will revise their expectations downward and submit bids that are strictly less than the expected value conditional on the event of winning when agents behave in this fashion a winner s curse does not result in the sense of bidders paying more on average than the items are worth this paper focuses on sealed bid auctions for objects of uncertain value a market institution for which theoretical predictions and empirical evidence concerning a winner s curse are mixed current theoretical development excludes the possibility of bidders paying more on average than the items are worth yet some empirical evidence in the sale of oil tracts as seen in capen clapp and campbell 1971 lohrenz and dougherty 1983 and mead moseidjord and sorenson 1983 suggests that the winner s curse may be present a series of experiments is designed and conducted in order to answer the following empirical research questions does the winner s curse exist in this auction framework and if it does what is its duration its relation to agent experience in the market and its breadth of impact across agents

follies subdued informational efficiency under adaptive expectations and confirmatory bias abstract we study the informational efficiency of a market with a single traded asset the price initially differs from the fundamental value about which the agents have noisy private information which is on average correct a fraction of traders revise their price expectations in each period the price at which the asset is traded is public information the agents expectations have an adaptive component and a social interactions component with confirmatory bias we show that taken separately each of the deviations from rationality worsens the informational efficiency of the market however when the two biases are combined the degree of informational inefficiency of the market measured as the deviation of the long run market price from the fundamental value of the asset can be non monotonic both in the weight of the adaptive component and in the degree of confirmatory bias for some ranges of parameters two biases tend to mitigate each other s effect thus increasing informational efficiency

the pricing of initial public offerings a dynamic model with information production this paper presents an information theoretic model of ipo pricing in which insiders sell stock in both the ipo and the secondary market have private information about their firm s prospects and outsiders may engage in costly information production about the firm high value firms knowing they are going to pool with low value firms induce outsiders to engage in information production by underpricing which compensates outsiders for the cost of producing information the information is reflected in the secondary market price of equity giving a higher expected stock price for high value firms

rates of information aggregation in common value auctions we study the rates at which transaction prices aggregate information in common value auctions under the different information structures in wilson rev econ stud 44 1977 511 and pesendorfer and swinkels econometrica 65 1997 1247 we consider uniform price auctions in which k identical objects of unknown value are auctioned to n bidders where both n and k are allowed to diverge to infinity and k n converges to a number in 0 1 the wilson assumptions lead to information aggregation at a rate proportional to n k but the price aggregates information at a rate proportional to n k in the ps setting we also consider english auctions and investigate whether the extra information revealed in equilibrium improves convergence rates in these auctions

asymptotic revenue equivalence in auctions abstract we study the revenue in auctions of a single object when the number of bidders becomes large we show that all sequences of auctions belonging to a class of mechanisms have limiting expected revenue equal to the expected best use value of the object an important special case that is covered is common value auctions but more generally not even affiliation of values is assumed this provides an asymptotic revenue equivalence result for settings beyond that of private values journal of economic literature classification numbers d44 c72