Journal article
Projection of Private Values in Auctions
The American economic review, Vol.111(10), pp.3256-3298
10/01/2021
DOI: 10.1257/aer.20200988
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.
Details
- Title: Subtitle
- Projection of Private Values in Auctions
- Creators
- Tristan Gagnon-Bartsch - Harvard UniversityMarco Pagnozzi - Centre for Studies in Economics and FinanceAntonio Rosato - University of Technology Sydney
- Resource Type
- Journal article
- Publication Details
- The American economic review, Vol.111(10), pp.3256-3298
- Publisher
- Amer Economic Assoc
- DOI
- 10.1257/aer.20200988
- ISSN
- 0002-8282
- eISSN
- 1944-7981
- Number of pages
- 43
- Grant note
- DE180100190 / ARC; Australian Research Council
- Language
- English
- Date published
- 10/01/2021
- Academic Unit
- Economics
- Record Identifier
- 9984696572802771
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