Multiagent System Simulations of Signal Averaging in English Auctions with Two-Dimensional Value Signals

Abstract

Computational experiments with a multiagent system show that bidders use signal averaging to avoid the winner's curse in English auctions. The results vary with the percent of common value in a two-dimensional value signal, information levels, uncertainty, and the number of bidders. The complexity introduced by the combinations of these factors affects the bidding strategies and auction outcomes in interesting ways--usually nonlinearly and sometimes non-monotonically. Of main concern to a seller is the effect of these factors on revenue. I find that revenue increases with the percent of common value in the two-dimensional value signal, decreases with uncertainty, and increases with the number of bidders. There is very little impact of information level on revenue when values are pure private and pure common. However, for the intermediate cases of two-dimensional value signals, revenue decreases with increased information.