Vecon Lab Common Value Auction: Introduction


This program implements a common value auction in which each bidder receives a "signal" that is a random draw from a uniform distribution. The value of the prize is the average of these draws, so each bidder only sees a part of the common value. You may specify the upper and lower bounds of the distribution of signals, the group sizes, matching protocols, etc.
The game highlights the "winner's curse" caused by the tendency for the winner to have one of the highest signals. Hence the winning bid may exceed the common value, even though each person's signal is unbiased in the absence of selection effects. The winner's curse causes losses that are more severe with large groups, so the default setup involves a change in the group size.

Vecon Lab - September 17, 2014