Working Paper Series
Asymmetric Information in Auctions: Are Resellers Better Appraisers?
Abstract: This paper shows that in online car auctions, resellers
are better at appraising the value of the cars they are bidding on than are
consumers. Using a unique data set of online car auctions, I show that
differences in bidding behavior between resellers and consumers can be
explained by heterogeneity in the accuracy of biddersí private signals and
heterogeneity in the dispersion of private value components. I use the
asymmetric ascending auction model of Hong and Shum (2003) to quantify the
differences between resellers and consumers, finding that the dispersion of
reseller value signals is roughly half that of consumers and simulate three
different counterfactual scenarios - one in which consumers are provided
with more information, one in which consumers are subsidized and one in
which consumers are allowed into all-reseller auctions. Finally, I argue
that the asymmetry in signal precision stems not from asymmetric
information regarding the technical characteristics of a car but rather
from uncertainty about the carís resale value.
Keywords: Ascending (English) Auctions; Asymmetric Auctions; Experience; Learning; Winnerís Curse; Bid Shading; Signal Precision; Resellers; (follow links to similar papers)
JEL-Codes: C51; D44; D82; L62; (follow links to similar papers)
58 pages, February 16, 2016
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