The Loser's Curse and Information Aggregation in Common Value Auctions

The authors consider an auction in which k identical objects of unknown value are auctioned off to n bidders. The k highest bidders get an object and pay the k + 1st bid. Bidders receive a signal that provides information about the value of the object. The authors characterize the unique symmetric equilibrium of this auction. They then consider a sequence of auctions A[subscript]r with n[subscript]r bidders and k[subscript]r objects. The authors show that price converges in probability to the true value of the object if and only if both the number of objects (k) and the number of bidders who do not receive an object (n - k) go to infinity.