320 likes | 473 Views
Outline. In-Class Experiment on First-Price Sealed-Bid Auctions Professor John Morgan: Internet Auctions The Winner’s Curse Hypothesis: Kagel and Levin (1986) Revenue equivalence and strategic equivalence hypotheses: Auction Formats. Information Structure. Public Information Auctions.
E N D
Outline • In-Class Experiment on First-Price Sealed-Bid Auctions • Professor John Morgan: Internet Auctions • The Winner’s Curse Hypothesis: Kagel and Levin (1986) • Revenue equivalence and strategic equivalence hypotheses: Auction Formats
Public Information Auctions • Two separate auction markets simultaneously: • Bidding in the first auction market continued as before under private information conditions • After the bids were submitted (but before they were posted), a public information signal was introduced and subjects were ask to bid again. • Public information signal: The lowest of the private information signals distributed, xL was posted.
A Summary Winner’s Curse (Strategic Discounting) RNNE R3 R1 No Public Information Yes R2 R2 R1 > R2 > R3
Small and Large Groups • Small Groups (3-4 bidders) • Large Groups (5-7 bidders) • All subjects were experienced bidders
Research Hypotheses • Hypothesis 1: Under private information conditions, market outcomes are consistent with RNNE. • Hypothesis 2: Announcing XL, the lowest private information signal, raises average seller’s revenues by the average amount predicted under the RNNE model. • Hypothesis 3: Under private information conditions, experienced bidders avoid winner’s curse (i.e., average profits are closer to the RNNE level than the zero/negative profits predicted under the winner’s curse) (a weakened form of Hypothesis 1)
Research Hypotheses • Hypothesis 4: Public information raises average seller’s revenue (a weakened version of Hypothesis 2). • Hypothesis 5: Hypotheses 3 and 4 apply uniformly to experiments with small and large numbers of bidders. • Hypothesis 6: Bidders are sensitive to the strategic implications of the auctions (e and public information condition) so that when the winner curse hypothesis and the RNNE model coincide, the RNNE model provides a reasonable characterization of the data.
A Summary Winner’s Curse (Strategic Discounting) RNNE R3 R1 No Public Information Yes R2 R2 R1 > R2 > R3
Effects of Public Information on Seller’s Revenue R2-R3 R2-R1
Research Hypotheses • Hypothesis 1: Under private information conditions, market outcomes are consistent with RNNE. • Hypothesis 2: Announcing XL, the lowest private information signal, raises average seller’s revenues by the average amount predicted under the RNNE model. • Hypothesis 3: Under private information conditions, experienced bidders avoid winner’s curse (i.e., average profits are closer to the RNNE level than the zero/negative profits predicted under the winner’s curse) (a weakened form of Hypothesis 1)
Research Hypotheses • Hypothesis 4: Public information raises average seller’s revenue (a weakened version of Hypothesis 2). • Hypothesis 5: Hypotheses 3 and 4 apply uniformly to experiments with small and large numbers of bidders. • Hypothesis 6: Bidders are sensitive to the strategic implications of the auctions (e and public information condition) so that when the winner curse hypothesis and the RNNE model coincide, the RNNE model provides a reasonable characterization of the data.
Summary • H1 and H2 Rejected • H3 and H4 Not rejected • H5 Rejected • H6 Not rejected