Presented By: Department of Economics
Social, Behavioral & Experimental Economics (SBEE): The Common-Probability Auction Puzzle (joint with Andy Schotter)
M. Kathleen Ngangoué, University of California Los Angeles
Abstract: "This paper presents a puzzle in the behavior of experimental subjects in what we call common-probability auctions. In common-value auctions, uncertainty is defined over values while, in common-probability auctions, uncertainty is defined over probabilities. We find that in contrast to the substantial overbidding found in common-value auctions, bidding in strategically equivalent common-probability auctions is consistent with Nash-equilibrium. This difference between the two uncertain environments originates in subjects' strategic valuations of the object."
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