Common value vs. private value categories in online auctions: A distinction without a difference?

There is a growing body of empirical research that attempts to distinguish private value from common value auctions. Strategic behavior for a seller/bidder in these two paradigms should differ, so the assumption of, or the identification of, the type of auction (private or common) is important for understanding the auction dynamics and strategies in game-theoretic models. However, it is difficult to recognize which of the two paradigms applies to a particular good. In this article, we briefly review some of the empirical work distinguishing common/private values using observed bidding behavior, both structural nonparametric and parametric models of auctions. We then examine the use of a priori beliefs to classify product categories. Specifically, we survey auction experts on their subjective judgment in classifying a list of consumer product categories on a private/common value continuum. We also survey consumers, asking them their subjective assessment. Interestingly, not only are extant models unable empirically to distinguish between private value and common value auctions, but also the experts have strongly divergent opinions on classifying product categories on this continuum. These findings raise doubts about the appropriateness of using a priori beliefs to classify a product as a common value versus a private value, and furthermore the findings question the feasibility of game-theoretic models to empirically distinguish private value from common value auctions. Perhaps decision theory would be a more useful paradigm for modeling auction decisions in practice.