Presentation of paper

Lowest Unique Bid Auctions with Signals

Speaker

Andrea Gallice - Università di Torino e Collegio Carlo Alberto

Abstract

A lowest unique bid auction allocates a good to the agent who submits the lowest bid which is not matched by any other bid. This study shows that when all the bidders are rational, such a selling mechanism can lead to positive profits only if there are sizeable gains from trade. On the contrary, the auction becomes highly lucrative if at least some bidders are myopic. In this second case, we analyze the key role played by the existence of some private signals that the seller sends to the bidders about the status of their bids. Data about actual lowest unique bid auctions confirm the profitability of the mechanism and the limited rationality of the bidders. 

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