A rational bidder in a private-value auction should be reluctant to incur the cost of perfectly estimating his value if it might not matter to the success of his bidding strategy. This can explain sniping---flurries of bids at the end of auctions---as the result of other bidders trying to avoid stimulating the victim into learning more about his value. The idea of value discovery also explains why a bidder might increase his bid ceiling in the course of an auction and why he would like to know the private values of other bidders.
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Strategic Implications of Uncertainty over One's Own Private Value in Auctions
Eric Bennett Rasmusen1
1Indiana University, Kelley School of Business, erasmuse@indiana.edu
Citation Information: Advances in Theoretical Economics. Volume 6, Issue 1, Pages 1–22, ISSN (Online) 1534-5963, DOI: 10.2202/1534-5963.1261, November 2006
Publication History:
- Published Online:
- 2006-11-01
Keywords: auctions; private-value; sniping; internet auctions
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