If you are looking for a televised example of an unknown common values auction:
A&E presents the new original real-life series “Storage Wars,” which follows four professional buyers and their teams as they scour repossessed storage units in search of hidden treasure. Part gamblers, part detectives, these seasoned veterans have found everything from coffins to the world’s most valuable comic book collection, paying as little as ten dollars for items valued in the millions.
In Storage Wars the value of each of the bidders is a function of their own tastes and the value of others (and the goofy bidding games they play). The true value of the storage locker is revealed after the auction when the winning bidder takes the items to be appraised.
And note: Today is my last day of teaching MBA managerial economics! I'm going to try to simulate some auction theory using a couple of decks of playing cards with the face cards taken out.
- Each student gets a card and it is defined as their private value. We'll proceed through English, First Price, Second Price and English auctions and observe bidding behavior and revenues.
- Next, to demonstrate an unknown common value auction (e.g., storage wars, oil and gas drilling rights) each student will be told that the value on the card is their estimate of the true value of the item. The common true value of the item will be drawn randomly from another deck of cards with the exact distribution of that passed out in class (at least, almost exact). There is a good chance that the highest bid will be greater than (a) the estimated bid of the winning bidder and (b) the true value of the item.
I'm sure there is a better version of this out there somewhere (but it is what I'm able to come up with in my daily class prep panic); any pointers to something better?