The nature of information and its effect on bidding behavior: Laboratory evidence in a first price common value auction

• First price auctions of common value good.
• Three information structures: private information, public information and common uncertainty.
• Half of the subjects bid differently depending on whether information is private or public.
• Cluster analysis helps understanding the behavior of the most unsophisticated subjects.

We study in the laboratory a series of first price sealed bid auctions of a common value good. Bidders face three types of information: private information, public information and common uncertainty. Auctions are characterized by the relative size of these three information elements. Only half of our subjects bid differently depending on whether the last piece of information obtained is private or public but they do not react to each type of information as predicted by theory. The other half of the subjects do not distinguish between private and public information and either consistently underbid or consistently overbid.