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.
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The present paper is based on Garratt and Wooders (2004). We are grateful to John Kagel for providing us with data from experiments reported in Kagel and Levin (1993). We thank Dan Ackerberg, Victor Tremblay, and two anonymous referees for helpful comments.
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Open Access This is an open access article distributed under the terms of the Creative Commons Attribution Noncommercial License (https://creativecommons.org/licenses/by-nc/2.0), which permits any noncommercial use, distribution, and reproduction in any medium, provided the original author(s) and source are credited.
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Garratt, R.J., Wooders, J. Efficiency in Second-Price Auctions: A New Look at Old Data. Rev Ind Organ 37, 43–50 (2010). https://doi.org/10.1007/s11151-010-9255-7
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DOI: https://doi.org/10.1007/s11151-010-9255-7