Economics research seminar: Idione Meneghel, Australian National University

Research topic: Paying to Overbid 

Presenter

Idione Meneghel, Australian National University

Topic

Paying to Overbid

abstract

Overbidding appears to be common in a variety of auctions, both in the laboratory and in the field. This paper suggests an explanation for overbidding based on agency costs. Principals must hire agents to bid in an auction, giving rise to a competing-mechanisms problem with informational interdependence among the agents. The agents can exert unobserved and costly effort to collect information about the value of the object. The optimal remuneration scheme must induce the agents to exert effort and then appropriately condition their bids on their information. We identify conditions under which this remuneration scheme induces overbidding

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