Welcome to the new version of CaltechAUTHORS. Login is currently restricted to library staff. If you notice any issues, please email coda@library.caltech.edu
Published November 29, 2017 | Submitted
Report Open

Information Aggregation in Double Auctions: Rational Expectations and the Winner's Curse


This paper inquires about the ability of double auction institutions to aggregate information in the context of a "common value" information structure that is known to produce the winner's curse in sealed bid environments. While many fundamental features of the economic environment are different from those studied in the context of sealed bids, the pattern of information distributed to the population of traders is the same. This gives us an opportunity to determine if the behaviors reported in sealed bid environments can be detected in the more active market environment. As such the experiments are also a test of the robustness of earlier experiments that demonstrate that in economies with homogeneous preferences similarities single compound securities organized by double auctions are able to aggregate information. The basic result is that a severe winner's curse is not observed. The irrationality observed in sealed bids does not extend itself to the double auction environment. Information aggregation is observed and the rational expectations model receives support.

Additional Information

Effort sponsored by the Defense Advanced Research Projects Agency (DARPA) and Air Force Research Laboratory, Air Force Material Command, USAF, under agreement number F30602-00-2-0623. The U.S. Government is authorized to reproduce and distribute reprints for Governmental purposes notwithstanding any copyright annotations thereon." The views and conclusions contained herein are those of the authors and should not be interpreted as necessarily representing the official policies or endorsements, either expressed or implied, of the Defense Advanced Research Projects Agency (DARPA), the Air Force Research Laboratory, or the U.S. Government. Additional support of the National Science Foundation is also acknowledged as is the support of the Laboratory for Experimental Economics and Political Science of the California Institute of Technology. Published as Guarnaschelli, Serena and Kwasnica, Anthony M. and Plott, Charles R. (2003) Information Aggregation in Double Auctions: Rational Expectations and the Winner's Curse. Information Systems Frontiers, 5 (1). pp. 63-77.

Attached Files

Submitted - sswp1136.pdf


Files (153.9 kB)
Name Size Download all
153.9 kB Preview Download

Additional details

August 19, 2023
August 19, 2023