Review of Industrial Organization

, Volume 37, Issue 1, pp 43–50

Efficiency in Second-Price Auctions: A New Look at Old Data

Open Access
Article

DOI: 10.1007/s11151-010-9255-7

Cite this article as:
Garratt, R.J. & Wooders, J. Rev Ind Organ (2010) 37: 43. doi:10.1007/s11151-010-9255-7

Abstract

Experiments on second-price sealed-bid private value auctions have established that subjects typically bid more than their value, despite the fact that value bidding is a dominant strategy in such auctions. Moreover, the laboratory evidence shows that subjects do not learn to bid their values as they gain more experience. In the present paper, we re-examine the second-price auction data from Kagel and Levin’s (Econ J 103:868–879, 1993) classic paper. We find that auction efficiency increases over time, even though the frequency of overbidding is unchanged. We argue that the rise in efficiency is due to a decline in the variability of overbidding. This is consistent with subjects’ learning to bid more like each other.

Keywords

Bidding Efficiency Second price auction 
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Copyright information

© The Author(s) 2010

Authors and Affiliations

  1. 1.Department of EconomicsUniversity of CaliforniaSanta BarbaraUSA
  2. 2.Department of EconomicsTucsonUSA

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