Lecture by Prof. Dr. Marion Ott, ZEW & University of Gießen at the BERG Research Seminar on the 25th of November

We are pleased to announce that Prof. Dr. Marion Ott, ZEW & Uni Gießen, will give a lecture within the BERG-Research Seminar on the topic of

“Bid heterogeneity and winner’s curse in multi-unit auctions”

The date is Tuesday, 25th of November, 3 p.m., in room FG1/00.08.

Abstract

The winner's curse is prevalent in empirical common value auctions. Motivated by auctions for renewable energy support, we examine how the number of goods — that is, the level of competition for a given number of bidders — affects the winner's curse.  We theoretically and experimentally investigate reverse auctions for multiple units of a common-cost good and bidders with single-unit supply. With both discriminatory pricing and uniform pricing, bidders' profits in the experiment increase and the frequency of a loss decreases as the number of goods increases. With uniform pricing and a sufficient number of goods, bidders even perform better than in equilibrium. The observed pattern does not support theoretical predictions of better bidders' performance with discriminatory pricing than with uniform pricing and a worsening of their performance in the number of goods under uniform pricing. However, a model of bid heterogeneity and dispersed bids replicates the observed pattern. Dispersion strengthens the winner's curse in discriminatory auctions, but has a weaker effect the larger the number of goods. With uniform pricing, dispersion may protect from the winner's curse if the number of goods is sufficiently large, as observed in the experiment. Thus, with a low competition level and uniform pricing, the winner's curse may vanish.