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A model for sealed‐bid auctions with independent private value and common value components
Author(s) -
Harrison J. Richard
Publication year - 1990
Publication title -
managerial and decision economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.288
H-Index - 51
eISSN - 1099-1468
pISSN - 0143-6570
DOI - 10.1002/mde.4090110205
Subject(s) - common value auction , bid shading , unique bid auction , value (mathematics) , economics , econometrics , microeconomics , winner's curse , mathematics , mathematical economics , statistics , auction theory
This paper shows how a decision‐making model can be applied to a sealed‐bid auction with both independent private value (IPV) and common value (CV) components. The model yields estimates for the winning bid and for the actual value and error components of the winning bid as functions of the number of bidders and the underlying value and error distributions, assuming that these distributions are normal. The winner's curse and the special cases of IPV and CV auctions are examined using the model.