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Divisible Good Auctions with Asymmetric Information: An Experimental Examination

55 Pages Posted: 14 Jul 2012 Last revised: 12 Nov 2012

Emmanuel Morales-Camargo

The University of Texas at Arlington

Orly Sade

Hebrew University of Jerusalem - Department of Finance

Charles R. Schnitzlein

School of Business, University of Vermont

Jaime F. Zender

University of Colorado at Boulder - Department of Finance

Date Written: May 14, 2012

Abstract

An experimental approach is used to compare bidding behavior and auction performance in uniform-price and discriminatory auctions when there is incomplete information concerning the common value of the auctioned good. In a symmetric information environment, the different auction formats provide the same average revenue. However, when information is asymmetric the discriminatory auction results in higher average revenue than the uniform-price auction. The volatility of revenue is higher in the uniform-price auctions in all treatments. The results, therefore, provide support for the use of the discriminatory format. Subject characteristics and measures of experience in recent auctions are found to be useful in explaining bidding behavior.

Keywords: Divisible Good Auctions, Pricing Mechanism Performance, Information Environment, Bidding Behavior

JEL Classification: C52, C72, C91, D44, D81, D82

Suggested Citation

Morales-Camargo, Emmanuel and Sade, Orly and Schnitzlein, Charles R. and Zender, Jaime F., Divisible Good Auctions with Asymmetric Information: An Experimental Examination (May 14, 2012). Journal of Financial and Quantitative Analysis (JFQA), Forthcoming. Available at SSRN: https://ssrn.com/abstract=1262474

Emmanuel Morales-Camargo (Contact Author)

The University of Texas at Arlington ( email )

701 S. West Street
Arlington, TX 76019
United States
(817) 272-1276 (Phone)

Orly Sade

Hebrew University of Jerusalem - Department of Finance ( email )

Mount Scopus
Jerusalem, 91905
Israel
972 2 588 3227 (Phone)

Charles R. Schnitzlein

School of Business, University of Vermont ( email )

Burlington, VT 05405
United States
802-656-9281 (Phone)

Jaime F. Zender

University of Colorado at Boulder - Department of Finance ( email )

Boulder, CO 80309
United States
303-554-1665 (Phone)
303-492-4689 (Fax)

HOME PAGE: http://www-bus.colorado.edu/faculty/Zender/

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