Common value auctions with insider information

Bidding is studied in first-price common value auctions where an insider is better informed than other bidders (outsiders) about the value of the item . With inexperienced bidders, having an insider does not materially reduce the severity of the winner's curse compared to auctions with a symmetric in formation structure (SIS). In contrast, super-experienced bidders, who have largely overcome the winner's curse, satisfy the comparative static predic tions of equilibrium bidding theory: (i) average seller's revenue is larger with an insider than in SIS auctions, (ii) insiders make substantially gre ater profits, conditional on winning, than outsiders, and (iii) insiders in crease their bids in response to more rivals. Further, changes in insiders' bids are consistent with directional learning theory (Selten and Buchta (1 994)).