common value auction

A common value auction involves items whose worth is essentially the same for everyone, but the actual value each person assigns depends on how much they think they can benefit from it. For example, fishing rights or oil drilling rights are often auctioned this way. Participants bid based on their estimates of the maximum value they can gain, but since the true value is the same for all, the final price reflects the bidders’ perceptions and strategies rather than differing personal preferences. The goal is to determine the highest true value among bidders while managing the risk of overestimating or undervaluing the item.