Common Value English Auction
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- A group of bidders participates in an auction for the oil rights of a field
- There is a true value of the oil, but each bidder only has an estimate of this value
- At any point, you may place a bid higher than the current highest bid
- Auction ends when time runs out: highest bidder wins the oil rights and pays her bid
- Press the Test Drill button to get your estimate of the oil’s value
- Your screen also displays:
- the range of values for the true value of the oil;
- amount by which your estimate may differ from the true value.;
- current bids, sorted from highest to lowest.
- Use the slider to choose a bid amount, then click Bid to submit the bid
- For the winner: Payoff = True Value - Final Bid
- For everyone else: Payoff = 0
- Final bid when time runs out = $42
- Value Estimate of Final Bidder = $95
- True Value of Oil in Field = $87
Payoff |
= |
True Value |
– |
Final Bid |
$45 |
= |
$87 |
– |
$42 |