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Deciding Between the Common and Private Values Paradigm: An Application to Experimental Data*
Author(s) -
Olivier Armantier
Publication year - 2002
Publication title -
international economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.658
H-Index - 86
eISSN - 1468-2354
pISSN - 0020-6598
DOI - 10.1111/1468-2354.t01-1-00035
Subject(s) - intuition , nonparametric statistics , econometrics , monte carlo method , computer science , ex ante , mathematical economics , economics , mathematics , statistics , psychology , macroeconomics , cognitive science
In the application of auction theory to the real world, practitioners must choose ex ante which of the common value or the private values paradigm applies. Since intuition may fail, some authors have proposed to decide statistically between the two models. These studies, however, did not confirm whether the tests validated the true model since field data were used. I propose to use experimental data as well as Monte‐Carlo simulations to study different nonstructural rules to decide between the two paradigms. I find that regressions are inconclusive whereas a nonparametric procedure seems to be powerful and robust.