Y2K Bibliography of Experimental Economics and Social Science
Common Value Auction Experiments

updated December 29, 1999
Charles A. Holt, cah2k@virginia.edu, suggestions and corrections welcome
(for online and personal use only)

Avery, Christopher, and John H. Kagel (1997) “Second-Price Auctions with Asymmetric Payoffs: An Experimental Investigation,” Journal of Economics & Management Strategy, 6:3 (Fall), 573-603. Keywords: experiments, auctions, two-person second-price common value auctions, private value advantage, asymmetric values. Abstract: The paper reports second-price auctions in which each bidder draws a value component, and the common value is the sum of the components. This symmetric "shoe box" design is modified by giving one of the bidders an additional value increment, K, that is known to both bidders. The disadvantaged bidders in the experiment tend to bid much to aggressively and earn negative profits, whereas the advantaged bidder is close to making best response bids.

Ball, Sheryl B., Max H. Bazerman, and John S. Caroll (1990) “An Evaluation of Learning in the Bilateral Winner's Curse,” Organizational Behavior and Human Decision Processes, 481-22. Keywords: experiments, auctions, bilateral auction, information, bilateral winner's curse. Abstract: The setup begins with a random draw that determines the value of an object to the current owner. The value to the prospective buyer is 1.5 times the value to the seller, but only the seller knows the actual value. The buyer makes a single bid, and observed bids typically result in a losses for buyers, since they do not realize that acceptance is an informative event that places an upper limit on the object's value (the "winner's curse"). Email Contact: sball@vt.edu

Bazerman, Max H., and William F. Samuelson (1983) “I Won the Auction But Don't Want the Prize,” Journal of Conflict Resolution, 27618-634. Keywords: experiments, auctions, winner's curse. Email Contact: mbazer@nwu.edu

Brown, K. C. (1986) “In Search of the Winner's Curse: Comment,” Economic Inquiry, 24:3 (July), 513-516*. Keywords: experiments, auctions, winner's curse.

Campbell, C. M., John H. Kagel, and Dan Levin (1999) “The Winner's Curse and Public Information in Common Value Auctions: Reply,” American Economic Review, 89:1 (March), 325-334. Keywords: experiments, auctions, common values, public information, winner's curse. Email Contact: levin.36@osu.edu

Cox, James C., Samuel H. Dinkin, and Vernon L. Smith (1999) “The Winner's Curse and Public Information in Common Value Auctions: Comment,” American Economic Review, 89:1 (March), 319-324. Keywords: experiments, auctions, common value auctions, winner's curse, public information. Abstract: The authors report an error in the Kagel and Levin (1986) analysis of the Nash equilibrium for a common value auction with additional public information. Email Contact: jcox@bpa.arizona.edu

Cox, James C., and Stephen C. Hayne (1999) “Group vs. Individual Decision Making in Strategic Market Games,” University of Arizona, Discussion Paper, presented at the Spring 1999 Public Choice Meetings. Keywords: experiments, auctions, methodology, group decisions, information, winner's curse, curse of information. Abstract: The experiments show that both group decision-making units and individuals are subject to the winner's curse, but that the bias is more severe with with groups than with individuals, when both are experienced and groups have more information. Additional signals causes both individuals and groups to deviate more from rational bidding, but the effect is worse for groups. Email Contact: JCox@bpa.arizona.edu

Cox, James C., and R. Mark Isaac (1984) “In Search of the Winner's Curse,” Economic Inquiry, (October), 579-592. Keywords: experiments, auctions, winner's curse. Email Contact: jcox@bpa.arizona.edu

Cox, James C., and R. Mark Isaac (1986) “In Search of the Winner's Curse: Reply,” Economic Inquiry, 24:3 (July), 517-520. Keywords: experiments, auctions, winner's curse. Email Contact: jcox@bpa.arizona.edu

Dorsey, Rober E., and Laura Razzolini (1998) “Auctions versus Lotteries: Do Institutions Matter?,” University of Mississippi, Discussion Paper, presented at the Summer 1998 ESA Meeting. Keywords: experiments, auctions, lotteries, institutions, risk aversion. Abstract: The experiment compares individual behavior in two theoretically equivalent institutions, a first-price auction and a lottery. Although subjects face the same probability/payoff tradeoffs, they tend to behave in a more risk averse fashion in the auction. This overbidding is particularly strong for those with high values, which may explain the common use of auctions for fundraising purposes. Email Contact: dorsey@bus.olemiss.edu, laura@bus,olemiss.edu

Dyer, Douglas, and John H. Kagel (1996) “Bidding in Common Value Auctions: How the Commercial Construction Industry Corrects for the Winner's Curse,” Management Science, 42:10 (October), 1463-1475. Keywords: experiments, auctions, field data, construction industry, methodology, winner's curse. Abstract: This paper considers why construction industry executives fall prey to the winner's curse in the laboratory and avoid it in the field. Industry-specific bidding characteristics are identified. Implications for experimental economics are discussed.

Dyer, Douglas, John H. Kagel, and Dan Levin (1989) “A Comparison of Naive and Experienced Bidders in Common Value Offer Auctions: A Laboratory Analysis,” Economic Journal, 99:394 (March), 108-115. Keywords: experiments, auctions, common value, experience effects, methodology, winner's curse, risk aversion, expert subjects, subject pool effects. Abstract: The first price common value auctions were structured so that the low bidder wins the prize (e.g. construction contract). Overbidding and the winner's curse effect was observed for both student participants and in a session with experts from the construction industry. Differences behavior were attributed to risk aversion among the students and more risk neutral behavior fo the executives. Email Contact: levin.36@osu.edu

Garvin, Susan, and John H. Kagel (1994) “Learning in Common Value Auctions: Some Initial Observations,” Journal of Economic Behavior and Organization, 25:3 (December), 351-372. Keywords: experiments, auctions, common value auctions, learning.

Hansen, Robert, and John R. Lott (1991) “The Winner's Curse and Public Information in Common Value Auctions: Comment,” American Economic Review, 81:1 (March), 347-361. Keywords: experiments, auctions, common value auctions, winner's curse, information.

Hansen, R. G., and John R. Lott Jr. (1991) “The Winner's Curse and Public Information in Common Value Auctions: Comment,” American Economic Review, 81347-361. Keywords: experiments, auctions, winner's curse, public information, rationality.

Harstad, Ronald M. (1991) “Asymmetric Bidding in Second-Price, Common-Value Auctions,” Economic Letters, 35:3 (March), 249-252. Keywords: experiments, auctions, second-price auctions, common value, asymmetry. Email Contact: harstad@rutcor.rutgers.edu

Holt, Charles A., and Roger Sherman (1994) “The Loser's Curse,” American Economic Review, 84:3 642-652. Keywords: experiments, information, winner's curse, loser's curse, naive bidding, auctions, bargaining, asymmetric information. Abstract: In bilateral bargaining with asymmetric information, the uninformed agent bids too high and loses money in the winner's curse treatment and bids too low in the loser's curse treatment. The winner's curse is due to a failure to realize that an accepted bid puts an upper bound on the seller's value, and the loser's curse is due to a failure to realize that in increase in one's bid picks up relatively high-value items at the margin. Email Contact: holt@virginia.edu

Holt, Charles A., and Roger Sherman (1995) “Naive Bidding and the Winner's Curse in Auctions with Independent Common Value Components,” University of Virginia, Discussion Paper. Keywords: experiments, auctions, common value, winner's curse, error, risk aversion, naive bidding. Abstract: This paper considers a two-person, common value auction in which the rational bid is independent of risk attitudes. The observed overbidding is attributed to a combination of the winner's curse and risk aversion, which is both inferred from the bidding and measured independently. Email Contact: holt@virginia.edu

Kagel, John H. (1995) “Cross-Game Learning: Experimental Evidence from First-Price and English Common Value Auctions,” Economic Letters, 49:2 (August), 163-170. Keywords: experiments, auctions, common value, sequence effects, learning, first-price auctions, English auctions. Email Contact: kagel+@pitt.edu

Kagel, John H. (1995) “Auctions: A Survey of Experimental Research,” in The Handbook of Experimental Economics, edited by J. H. Kagel and A. E. Roth, Princeton: Princeton University Press, 501-585. Keywords: experiments, auctions, private value, common value, institutions, risk aversion, survey, English auctions, Dutch auctions, collusion. Abstract This handbook chapter surveys all aspects of the large literature on auction experiments. Email Contact: kagel+@pitt.edu

Kagel, John H. (1995) “Cross-Game Learning: Experimental Evidence from First-Price and English Common Value Auctions,” Economics Letters, 49163-170. Keywords: experiments, auctions, common value auctions, first-price auctions, English auctions, cross-game learning. Abstract: Prior experience in an English common value auction has no effect on reducing overbidding in a first-price common value auction, whereas prior experience in the first-price auction reduces the incidence of overbidding in first-price auctions. Email Contact: kagel+@pitt.edu

Kagel, John H. (1999) Common Value Auctions and the Winner's Curse, Princeton, N.J.: Princeton University Press (under review). Keywords: experiments, auctions, common value auctions, winner's curse, survey, first-price common value auctions, second-price common value auctions, public information, numbers effects, affiliated private values, English common value auctions, learning, cross game learning, naive bidding, experience effects, commercial construction industry. Abstract: This manuscript contains an introductory survey and a detailed analysis of common value auction experiments of all types. There is a detailed coverage of the winner's curse, of naive bidding models that generate it, and of the extent to which it is affected by learning. Email Contact: kagel+@pitt.edu

Kagel, John H., and Douglas Dyer (1988) “Learning in Common Value Auctions,” in Experimental Games and Markets, edited by R. Tietz, W. Albers and R. Selten, Berlin: Springer-Verlag, . Keywords: experiments, auctions, common value auctions, learning. Email Contact: kagel+@pitt.edu

Kagel, John H., and Dan Levin (1986) “The Winner's Curse and Public Information in Common Value Auctions,” American Economic Review, 76:5 (December), 894-920. Keywords: experiments, auctions, common value, first price, winner's curse, public information, numbers effects. Abstract: The paper constrasts the predictions of a strategic model of common value bidding, where an incresase in the number of bidders calls for lower bids to avoid the winner's curse, with a naive model in which ignoring the adverse selection factor calls form higher, more aggressive bids as the number of bidders increases. The winner's curse and consequent losses is more prevalent in auctions with larger numbers of bidders than was the case with 3-5 bidders. Contrary to risk neutral Nash predictions, the provision of public information in auctions with 6-7 bidders reduced seller revenue. Also, see the comment in Cox, Dinkin, and Smith (1999) and the authors' reply. Email Contact: kagel+@pitt.edu

Kagel, John H., and Dan Levin (1991) “The Winner's Curse and Public Information in Common Value Auctions: Reply,” American Economic Review, 81:1 (March), 362-369. Keywords: experiments, auctions, common value, winner's curse, public information. Email Contact: kagel+@pitt.edu

Kagel, John H., and Dan Levin (1999) “Common Value Auctions with Insider Information,” Econometrica, forthcoming. Keywords: experiments, auctions, common value auctions, insider information, winner's curse. Abstract: The experiments involve an insider who has better information than other bidders in a first price common value auction. The winner's curse is observed with inexperienced bidders. In sessions with experienced bidders who have largely overcome the winner's curse, the insider earns more profits, conditional on winning, and the insider increases bids in response to an increase in the number of bidders. Email Contact: levin.36@osu.edu

Kagel, John H., Dan Levin, Raymond C. Battalio, and Donald J. Meyer (1989) “First-Price Common Value Auctions: Bidder Behavior and the "Winner's Curse",” Economic Inquiry, 27:2 (April), 241-258. Keywords: experiments, auctions, common value, winner's curse, experience, bankruptcy. Abstract: Subjects in first-price common value auctions consistently bid above expected value, conditional on winning. The effects of experience and high losses are to reduce bids, payoffs remain below those predicted in a Nash equilibrium. Email Contact: kagel+@pitt.edu

Kagel, John H., Dan Levin, and Ronold M. Harstad (1994) “Comparative Static Effects of Number of Bidders and Public Information on Behavior in Second-Price Common Value Auctions,” International Journal of Game Theory, 23***. Keywords: experiments, auctions, second price, common value, numbers effects, public information. Email Contact: harstad@rutcor.rutgers.edu

Kagel, John H., Dan Levin, and Ronald M. Harstad (1995) “Comparative Static Effects of Number of Bidders and Public Information on Behavior in Second-Price Common Value Auction,” International Journal of Game Theory, 24:3 293-319. Keywords: experiments, auctions, common value, second-price auctions, public information. Abstract: The experiment implements a second price, common value auction in order to test the comparative statics result that Nash equilibrium bids should be decreasing in the number of bidders, regardless of risk attitudes. The failure of subjects to behave in this manner indicates that overbidding must be largely due to the winner's curse effect and cannot be explained only as an artifact of risk aversion. Email Contact: kagel+@pitt.edu

Kagel, John H., and Jean-Francois Richard (1997) “Super-Experienced Bidders in First-Price Common Value Auctions: Rules-of-Thumb, Nash Equilibrium Bidding and the Winner's Curse,” University of Pittsburgh, Discussion Paper. Keywords: experiments, auctions, experience effects, methodology, first-price common value auctions, rules of thumb, heuristics, winner's curse. Email Contact: kagel+@pitt.edu

Kamecke, Ulrich (1998) “Competition, Cooperation, and Envy in a Simple English Auction,” Humboldt University, Discussion Paper, presented at the Summer 1998 ESA Meetings. Keywords: experiments, auctions, auctions, envy, Nash equilibrium, common knowledge of "private value". Abstract: Subjects in an English auction are told in advance who has the highest willingness to pay. Some bidding above value is attributed to envy or inequality aversion. Email Contact: kamecke@wiwi.hu-berlin.de

Lamoureux, C, and C. Schnitzlein (1997) “Herd Through the Grapevine: Winner's Curse in a Fragmented Asset Market,” University of Arizona, Discussion Paper. Keywords: experiments, markets, asset markets, dealer intermediation, off floor search, losses, experience. Abstract: In an asset market experiment with asymmetric information and competing dealers, a rule that allows traders to search "off floor" causes dealer bid-ask spreads to tighten, with the effect that dealer profits are reduced. These losses persist even after dealers have obtained considerable experience. Comparisons with the winner's curse are discussed.

Levin, Dan, and Ronald M. Harstad (1986) “Symmetric Bidding in Second Price Common Value Auctions,” Economics Letters, 20315-319. Keywords: experiments, auctions, second price, common value. Email Contact: levin.36@osu.edu

Levin, Dan, John H. Kagel, and J.-F. Richard (1996) “Revenue Effects and Information Processing in English Common Value Auctions,” American Economic Review, 86:3 (June), 442-460. Keywords: experiments, auctions, English auctions, common value, revenue effects. Email Contact: levin.36@osu.edu

Levin, Dan, and J. L. Smith (1991) “Some Evidence on the Winner's Curse: Comment,” American Economic Review, 81:1 (March), 370-375. Keywords: experiments, auctions, common value, winner's curse. Email Contact: levin.36@osu.edu

Lind, Barry, and Charles R. Plott (1991) “The Winner's Curse: Experiments with Buyers and with Sellers,” American Economic Review, 81:1 (March), 335-346. Keywords: experiments, auctions, winner's curse, risk aversion. Abstract: Note: As a side comment, the authors conjecture that risk aversion be part of the explanation of overbidding in first price common value auctions, but risk aversion cannot account for overbidding in second price common value auctions.

Linden, Jordan, Anders Lunander, and Jan-Eric Nilsson (1998) “Revenues in Multi-Unit Common Value Auctions - An Experimental Study of Three Sealed-Bid and Three Open-Bid Mechanisms,” University College of South Stockholm, Discussion Paper, presented at the Summer 1998 ESA Meeting. Keywords: experiments, auctions, multi-unit demand, revenue comparisons, alternative auctions. Abstract: Four auction institutions are compared in a common-value setting with variable numbers of bidders who each demand two units. Revenues are higher in the uniform-price auction than is the case with discriminatory and Vickrey auctions. Email Contact: johan.linden@sh.se

Potters, Jan*, and J. Wit (1999) “Bets and Bids: Favorite-Longshot Bias and Winner's Curse,” Tilburg University, Discussion Paper. Keywords: experiments, decisions, bets, bids, longshot bias, risk attitudes, winner's curse. Email Contact: j.j.m.potters@kub.nl

Samuelson, William, and Max H. Bazerman (1985) “The Winner's Curse in Bilateral Negotiations,” in Research in Experimental Economics, Vol. 3, edited by V. L. Smith, Greenwich, Conn.: JAI Press, 105-137. Keywords: experiments, bargaining, asymmetric information, winner's curse. Email Contact: mbazer@nwu.edu

Thaler, Richard H. (1988) “Anomalies: The Winner's Curse,” Journal of Economic Perspectives, 2:1 (Winter), 191-202. Keywords: experiments, auctions, bargaining, winner's curse, anomalies, biases. Email Contact: richard.thaler@gsbsun.uchicago.edu

Wilson, Robert (1992) “Strategic Analysis of Auctions,” in Handbook of Game Theory with Economic Applications, edited by R. J. Aumann and S. Hart, Amsterdam: Elsevier Science Publishers, . Keywords: experiments, auctions, winner's curse. Email