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Theories and Tests of Blind Bidding in Sealed-bid Auctions

Forsythe, Robert and Isaac, R. Mark and Palfrey, Thomas R. (1989) Theories and Tests of Blind Bidding in Sealed-bid Auctions. RAND Journal of Economics, 20 (2). pp. 214-238. ISSN 0741-6261.

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In this article we report the results from a series of laboratory markets in which sellers have better information about the quality of an item than any of the potential buyers. Sellers may voluntarily choose to reveal this information or they may instead decide to "blind bid" the item. We find that a sequential equilibrium model where buyers "assume the worst" is a good predictor of behavior in these simple markets. This equilibrium is not instantaneously attained, however, but there is an unraveling process which describes how this equilibrium is approached. At the conclusion of the market, allocations tend to be full efficient, ex post.

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Palfrey, Thomas R.0000-0003-0769-8109
Additional Information:© 1989 RAND Corporation. We would like to thank Steve Hansen for his assistance with the experiments conducted at Carnegie-Mellon University, and Shawn LaMaster for his help in constructing the figures contained in this paper. Funds for conducting the experiments were provided by the Karl Eller Center for the Study of the Private Market Economy at the University of Arizona. Partial support for Forsythe was provided by NSF Grants IST-8610360 and SES-8607771; partial support for Isaac was provided by NSF Grant SES-8606770; partial support for Palfrey was provided by NSF Grants IST-8406296 and SES-8608118.
Group:Social Science Working Papers
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University of ArizonaUNSPECIFIED
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Social Science Working Paper670
Issue or Number:2
Record Number:CaltechAUTHORS:20160307-151348936
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Official Citation:Forsythe, Robert, R. Mark Isaac, and Thomas R. Palfrey. 1989. “Theories and Tests of "blind Bidding" in Sealed-bid Auctions”. The RAND Journal of Economics 20 (2). [RAND Corporation, Wiley]: 214–38.
Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:65153
Deposited On:06 Apr 2016 22:34
Last Modified:22 Nov 2019 09:58

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