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Spite and Reciprocity in Auctions

Author

Listed:
  • Naoko Nishimura

    (Department of Economics, Shinshu University, Matsumoto, Nagano 390-8621, Japan)

  • Timothy N. Cason

    (Department of Economics, Purdue University, West Lafayette, IN 47907-2076, USA)

  • Tatsuyoshi Saijo

    (ISER, Osaka University, Ibaraki, 567-0047, Japan
    CASSEL, University of California—Los Angeles, Los Angeles, CA 90095-1484, USA)

  • Yoshikazu Ikeda

    (Department of Economics, University of Kitakyushu, Kitakyushu, Fukuoka 802-0841, Japan)

Abstract

The paper presents a complete information model of bidding in second price sealed-bid and ascending-bid (English) auctions, in which potential buyers know the unit valuation of other bidders and may spitefully prefer that their rivals earn a lower surplus. Bidders with spiteful preferences should overbid in equilibrium when they know their rival has a higher value than their own, and bidders with a higher value underbid to reciprocate the spiteful overbidding of the lower value bidders. The model also predicts different bidding behavior in second price as compared to ascending-bid auctions. The paper also presents experimental evidence broadly consistent with the model. In the complete information environment, lower value bidders overbid more than higher value bidders, and they overbid more frequently in the second price auction than in the ascending price auction. Overall, the lower value bidder submits bids that exceed value about half the time. These patterns are not found in the incomplete information environment, consistent with the model.

Suggested Citation

  • Naoko Nishimura & Timothy N. Cason & Tatsuyoshi Saijo & Yoshikazu Ikeda, 2011. "Spite and Reciprocity in Auctions," Games, MDPI, vol. 2(3), pages 1-47, September.
    • Handle: RePEc:gam:jgames:v:2:y:2011:i:3:p:365-411:d:13998
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    References listed on IDEAS

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    Cited by:

    1. Bierbrauer, Felix & Netzer, Nick, 2016. "Mechanism design and intentions," Journal of Economic Theory, Elsevier, vol. 163(C), pages 557-603.
    2. Oliver Kirchkamp & Wladislaw Mill, 2019. "Spite vs. risk: explaining overbidding," CESifo Working Paper Series 7631, CESifo.
    3. Erik O Kimbrough & J Philipp Reiss, 2012. "Measuring the Distribution of Spitefulness," PLOS ONE, Public Library of Science, vol. 7(8), pages 1-8, August.
    4. Kaplan, Todd R. & Zamir, Shmuel, 2015. "Advances in Auctions," Handbook of Game Theory with Economic Applications,, Elsevier.
    5. Kassas, Bachir & Palma, Marco A. & Anderson, David P., 2017. "Fine-Tuning Willingness-To-Pay Estimates in Second Price Auctions," 2017 Annual Meeting, July 30-August 1, Chicago, Illinois 258466, Agricultural and Applied Economics Association.
    6. Björn Bartling & Tobias Gesche & Nick Netzer, 2017. "Does the absence of human sellers bias bidding behavior in auction experiments?," Journal of the Economic Science Association, Springer;Economic Science Association, vol. 3(1), pages 44-61, July.
    7. Erik O Kimbrough & J Philipp Reiss, 2012. "Measuring the Distribution of Spitefulness," PLOS ONE, Public Library of Science, vol. 7(8), pages 1-8, August.
    8. Bartling, Björn & Netzer, Nick, 2016. "An externality-robust auction: Theory and experimental evidence," Games and Economic Behavior, Elsevier, vol. 97(C), pages 186-204.
    9. Kassas, Bachir & Palma, Marco A. & Anderson, David P., 2018. "Fine-tuning willingness-to-pay estimates in second price auctions for market goods," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 77(C), pages 50-61.
    10. Sanjaya, Muhammad Ryan, 2023. "Antisocial behavior in experiments: What have we learned from the past two decades?," Research in Economics, Elsevier, vol. 77(1), pages 104-115.
    11. Emma von Essen & Jonas Karlsson, 2019. "The effect of competition on discrimination in online markets—Anonymity and selection," PLOS ONE, Public Library of Science, vol. 14(8), pages 1-18, August.
    12. Brishti Guha, 2018. "Malice in auctions and commitments to cancel," Economics Bulletin, AccessEcon, vol. 38(3), pages 1623-1631.
    13. Alexandros Karakostas & Nhu Tran & Daniel John Zizzo, 2022. "Experimental Insights on Anti-Social Behavior: Two Meta-Analyses," Discussion Papers Series 658, School of Economics, University of Queensland, Australia.
    14. Sven Fischer & Werner Güth & Todd R. Kaplan & Ro'i Zultan, 2021. "Auctions With Leaks About Early Bids: Analysis And Experimental Behavior," Economic Inquiry, Western Economic Association International, vol. 59(2), pages 722-739, April.
    15. Sadrieh, Abdolkarim & Schröder, Marina, 2017. "Acts of helping and harming," Economics Letters, Elsevier, vol. 153(C), pages 77-79.
    16. Tan, Charmaine H.Y., 2020. "Overbidding and matching rules in second-price auctions: An experimental study," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 84(C).
    17. Kirchkamp, Oliver & Mill, Wladislaw, 2021. "Spite vs. risk: Explaining overbidding in the second-price all-pay auction," Games and Economic Behavior, Elsevier, vol. 130(C), pages 616-635.
    18. Mill, Wladislaw, 2017. "The spite motive in third price auctions," Economics Letters, Elsevier, vol. 161(C), pages 71-73.
    19. Che, Yeon-Koo & Choi, Syngjoo & Kim, Jinwoo, 2017. "An experimental study of sponsored-search auctions," Games and Economic Behavior, Elsevier, vol. 102(C), pages 20-43.
    20. Juergen Bracht & Adam Zylbersztejn, 2018. "Moral judgments, gender, and antisocial preferences: an experimental study," Theory and Decision, Springer, vol. 85(3), pages 389-406, October.

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