Journal Of The Econometric Society

An International Society for the Advancement of Economic
Theory in its Relation to Statistics and Mathematics

Edited by: Guido W. Imbens • Print ISSN: 0012-9682 • Online ISSN: 1468-0262

Econometrica: Sep, 1999, Volume 67, Issue 5

Common Value Auctions with Insider Information
p. 1219-1238

John H. Kagel, Dan Levin

Bidding is studied in first‐price common value auctions where an is better informed than other bidders (outsiders) about the value of the item. With inexperienced bidders, having an insider does not materially reduce the severity of the winner's curse compared to auctions with a (SIS). In contrast, super‐experienced bidders, who have largely overcome the winner's curse, satisfy the comparative static predictions of equilibrium bidding theory: (i) average seller's revenue is with an insider than in SIS auctions, (ii) insiders make substantially greater profits, conditional on winning, than outsiders, and (iii) insiders increase their bids in response to more rivals. Further, changes in insiders' bids are consistent with directional learning theory (Selten and Buchta (1994)).

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