When curiosity kills the profits: An experimental examination

Julian Jamison*, Dean S. Karlan

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

1 Scopus citations

Abstract

Economic theory predicts that in a first-price auction with equal and observable valuations, bidders earn zero profits. Theory also predicts that if valuations are not common knowledge, then since it is weakly dominated to bid your valuation, bidders will bid less and earn positive profits. Hence, rational players in an auction game should prefer less public information. We are perhaps more used to seeing these results in the equivalent Bertrand setting. In our experimental auction, we find that individuals without information on each other's valuations earn more profits than those with common knowledge. However, given a choice between the two sets of rules, approximately half the individuals preferred to have the public information. We discuss possible explanations, including showing that there is a correlation between ambiguity aversion and a preference for having more information in the auction.

Original languageEnglish (US)
Pages (from-to)830-840
Number of pages11
JournalGames and Economic Behavior
Volume66
Issue number2
DOIs
StatePublished - Jul 2009

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

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