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

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

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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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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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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Fernando Vega-Redondo, 1997. "The Evolution of Walrasian Behavior," Econometrica, Econometric Society, vol. 65(2), pages 375-384, March.
  2. Jorgen W. Weibull, 1997. "Evolutionary Game Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262731215.
  3. Abbink, Klaus & Gary Bolton & Abdolkarim Sadrieh & Fang-Fang Tang, 1996. "Adaptive Learning versus Punishment in Ultimatum Bargaining," Discussion Paper Serie B 381, University of Bonn, Germany.
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  4. Selten, Reinhard, . "Features of Experimentally Observed Bounded Rationality," Discussion Paper Serie B 421, University of Bonn, Germany, revised Nov 1997.
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  5. W. Güth, . "Boundedly Rational Decision Emergence -A General Perspective and Some Selective Illustrations-," Sonderforschungsbereich 373 1997-29, Humboldt Universitaet Berlin.
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  6. Selten, Reinhard & Joachim Buchta, 1994. "Experimental Sealed Bid First Price Auctions with Directly Observed Bid Functions," Discussion Paper Serie B 270, University of Bonn, Germany.
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  1. Sadrieh, A. & Pezanis-Christou, P., 2003. "Elicited bid functions in (a)symmetric first-price auctions," Discussion Paper 58, Tilburg University, Center for Economic Research. [Downloadable!]
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  2. Stefan Klonner, 2003. "Empirical Analysis of Rosca Auctions in a South Indian Village," Working Papers 854, Economic Growth Center, Yale University. [Downloadable!]
  3. Oliver Kirchkamp, & Philipp Reiß, 2006. "Expectations in first-price auctions," CRIEFF Discussion Papers 0609, Centre for Research into Industry, Enterprise, Finance and the Firm. [Downloadable!]
  4. 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. [Downloadable!]
  5. W. Güth, . "Robust Learning Experiments -Evidence for Learning and Deliberation-," Sonderforschungsbereich 373 2000-82, Humboldt Universitaet Berlin.
  6. Kirchkamp, Oliver & Reiss, J. Philipp & Sadrieh, Abdolkarim, 2008. "A pure variation of risk in private-value auctions," Research Memoranda 050, Maastricht : METEOR, Maastricht Research School of Economics of Technology and Organization. [Downloadable!]
  7. Werner Güth, 2005. "On Inequity Aversion," Papers on Strategic Interaction 2005-24, Max Planck Institute of Economics, Strategic Interaction Group. [Downloadable!]
  8. 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. [Downloadable!]
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