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Indiana University Bloomington

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Journal Articles

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

2006, The BE Press Journal

Eric Bennett Rasmusen

Abstract

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.

Citation

Rasmusen, Eric Bennett (2006), "Strategic Implications of Uncertainty Over One's Own Private Value in Auctions" in The BE Press Journal, Advances in Theoretical Economics, Vol. 6: No. 1, Article 7.

Keywords

auctions, private-value, sniping, internet auctions