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Learning to bid - an experimental study of bid function adjustments in auctions and fair division games

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  • Werner G¸th
  • Radosveta Ivanova-Stenzel
  • Manfred K–nigstein
  • Martin Strobel

Abstract

We examine learning behaviour in auction and fair division experiments with independent private values under two different price rules, first and second price. Participants play all four games repeatedly and submit complete bid functions rather than single bids. This allows us to study how institutional changes are anticipated and whether learning is influenced by the structural differences between games. We find that learning does not drive bidding towards the benchmark solution. Bid functions are adjusted globally rather than locally. Directional learning theory offers a partial explanation for bid changes. The data support a cognitive approach to learning. Copyright 2003 Royal Economic Society.

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Bibliographic Info

Article provided by Royal Economic Society in its journal The Economic Journal.

Volume (Year): 113 (2003)
Issue (Month): 487 (04)
Pages: 477-494

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Handle: RePEc:ecj:econjl:v:113:y:2003:i:487:p:477-494

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Cited by:
  1. Dennis A. V. Dittrich & Werner Güth & Martin Kocher & Paul Pezanis-Christou, . "Loss aversion and learning to bid," Papers on Strategic Interaction 2005-03, Max Planck Institute of Economics, Strategic Interaction Group.
    • Dennis A. V. Dittrich & Werner Güth & Martin G. Kocher & Paul Pezanis‐Christou, 2012. "Loss Aversion and Learning to Bid," Economica, London School of Economics and Political Science, vol. 79(314), pages 226-257, 04.
  2. Oliver Kirchkamp, & Eva Poen, & Philipp Reiß, 2006. "Outside options: Another reason to choose the first-price auction," CRIEFF Discussion Papers 0605, Centre for Research into Industry, Enterprise, Finance and the Firm.

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