In a common value auction, the asset being auctioned will provide the same value to any bidder, but that value is unknown to the bidders (for example, an auction of the mineral rights on a given tract of land). The “winner’s curse” refers to the fact that a bidder who most overestimates the value of the asset will win the auction. By contrast, in a private value auction, the asset being auctioned has a different value to each bidder (for example, an auction of an antique automobile), and each bidder will bid only as much as the asset is worth to him. An ascending price or English auction is a technique that can be used in a common value auction or a private value auction. |
