AUCTIONS WITH ALMOST COMMON VALUES - THE WALLET GAME AND ITS APPLICATIONS

We use a classroom game, the 'Wallet Game', to show that slight asymme tries between bidders can have very large effects on prices in standar d ascending (i.e. English) auctions of common-value objects. Examples of small asymmetries are a small value advantage for one bidder or a s mall ownership of the object by one bidder. The effects of these asymm etries are greatly exarcabated by entry costs or bidding costs. We dis cuss applications to Airwaves Auctions and Takeover Battles including the Glaxo-Wellcome Merger. (C) 1998 Elsevier Science B.V. All rights r eserved.