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Licensed Unlicensed Requires Authentication Published by De Gruyter November 1, 2006

Strategic Implications of Uncertainty over One's Own Private Value in Auctions

Eric Bennett Rasmusen

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.

Published Online: 2006-11-1

©2011 Walter de Gruyter GmbH & Co. KG, Berlin/Boston

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