Empirical tests of information aggregation

This paper proposes tests to empirically examine whether auction prices aggregate information away from the limit. These tests are applied to a unique data set containing winning bids and measures of the value and dispersion of information signals in eBay auctions for computers. Results suggest that prices partially aggregate information but do not converge to the common value. Even away from the limit, more bidders and stronger information have a significant effect on the convergence of prices and information aggregation. Even partial information aggregation may represent a potential efficiency gain over one-to-one trade of used goods with uncertain common values.