Efficiency in Second-Price Auctions: A New Look at Old Data
- Publication Type:
- Journal Article
- Review of Industrial Organization, 2010, 37 (1), pp. 43 - 50
- Issue Date:
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. © 2010 The Author(s).
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