Working Paper: CEPR ID: DP6503
Authors: Alex Gershkov; Flavio Toxvaerd
Abstract: This paper revisits recent empirical research on buyer credulity in arts auctions and auctions for assets in general. We show that elementary results in auction theory can fully account for some stylized facts on asset returns that have been held to suggest that sellers of assets can exploit buyers by providing biased estimates of asset values. We argue that, rather than showing that buyers are credulous, the existing evidence can serve as an indirect test of the rationality assumptions underlying auction theory.
Keywords: auctions; buyer credulity; information disclosure; seller manipulation
JEL Codes: D44; D82; G12; G14
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| introduction of auctioneer price estimates (D44) | bidder behavior (D44) |
| introduction of auctioneer price estimates (D44) | asset returns (G19) |
| announced valuations (G19) | bidder behavior (D44) |
| announced valuations (G19) | long-term performance of auctioned objects (D44) |
| bidder behavior (D44) | long-term performance of auctioned objects (D44) |