It is not just escalation: The one dollar game revisited
AbstractThis paper examines the one-dollar auction game ruling out escalation. The aim of the paper is to understand if players’ expectations about competitors’ moves are strong enough to induce at least one player to bid more than the auctioned euro. Any other bid represents an expected loss for the bidder, so he maximises his own payoff by choosing a bid, which produces a null expected payoff. The empirical results and the analysis based on them support theoretical findings. It is possible that the winner pays more than €1 to get €1 because of his expectations about competitors’ bids and because of his indifference over a certain interval. The results are symptoms of some risk aversion. In an English auction escalation leads to this result, but when escalation is ruled out, expectations and indifference of preferences can lead to the same result.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics).
Volume (Year): 41 (2012)
Issue (Month): 4 ()
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Web page: http://www.elsevier.com/locate/inca/620175
One-dollar game; Sealed auction; Rationality; Experiment;
Find related papers by JEL classification:
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
- C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
- D03 - Microeconomics - - General - - - Behavioral Microeconomics; Underlying Principles
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.:
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447R, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
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