Projection of Private Values in Auctions

Gagnon-Bartsch, T; Pagnozzi, M; Rosato, A

Projection of Private Values in Auctions

Gagnon-Bartsch, T Pagnozzi, M Rosato, A

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Publisher:: AMER ECONOMIC ASSOC
Publication Type:: Journal Article
Citation:: AMERICAN ECONOMIC REVIEW, 2021, 111, (10), pp. 3256-3298
Issue Date:: 2021-10-01

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Field	Value	Language
dc.contributor.author	Gagnon-Bartsch, T
dc.contributor.author	Pagnozzi, M
dc.contributor.author	Rosato, A https://orcid.org/0000-0003-1789-0225
dc.date.accessioned	2022-01-30T02:19:30Z
dc.date.available	2022-01-30T02:19:30Z
dc.date.issued	2021-10-01
dc.identifier.citation	AMERICAN ECONOMIC REVIEW, 2021, 111, (10), pp. 3256-3298
dc.identifier.issn	0002-8282
dc.identifier.issn	1944-7981
dc.identifier.uri	http://hdl.handle.net/10453/153824
dc.description.abstract	<jats:p> We explore how taste projection—the tendency to overestimate how similar others’ tastes are to one’s own—affects bidding in auctions. In first-price auctions with private values, taste projection leads bidders to exaggerate the intensity of competition and, consequently, to overbid—irrespective of whether values are independent, affiliated, or (a)symmetric. Moreover, the optimal reserve price is lower than the rational benchmark, and decreasing in the extent of projection and the number of bidders. With an uncertain common-value component, projecting bidders draw distorted inferences about others’ information. This misinference is stronger in second-price and English auctions, reducing their allocative efficiency compared to first-price auctions. (JEL D11, D44, D82, D83) </jats:p>
dc.language	English
dc.publisher	AMER ECONOMIC ASSOC
dc.relation.ispartof	AMERICAN ECONOMIC REVIEW
dc.relation.isbasedon	10.1257/aer.20200988
dc.rights	info:eu-repo/semantics/closedAccess
dc.subject	14 Economics, 15 Commerce, Management, Tourism and Services
dc.subject.classification	Economics
dc.title	Projection of Private Values in Auctions
dc.type	Journal Article
utslib.citation.volume	111
utslib.for	14 Economics
utslib.for	15 Commerce, Management, Tourism and Services
pubs.organisational-group	/University of Technology Sydney
pubs.organisational-group	/University of Technology Sydney/Faculty of Business
pubs.organisational-group	/University of Technology Sydney/Faculty of Business/Economics Discipline
utslib.copyright.status	closed_access	*
dc.date.updated	2022-01-30T02:19:29Z
pubs.issue	10
pubs.publication-status	Published
pubs.volume	111
utslib.citation.issue	10

Abstract:

We explore how taste projection—the tendency to overestimate how similar others’ tastes are to one’s own—affects bidding in auctions. In first-price auctions with private values, taste projection leads bidders to exaggerate the intensity of competition and, consequently, to overbid—irrespective of whether values are independent, affiliated, or (a)symmetric. Moreover, the optimal reserve price is lower than the rational benchmark, and decreasing in the extent of projection and the number of bidders. With an uncertain common-value component, projecting bidders draw distorted inferences about others’ information. This misinference is stronger in second-price and English auctions, reducing their allocative efficiency compared to first-price auctions. (JEL D11, D44, D82, D83)

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http://hdl.handle.net/10453/153824