Static vs Dynamic Auctions with Ambiguity Averse Bidders
AbstractAbstract: This paper presents the outcome of a dynamic price-descending auction when the distribution of the private values is uncertain and bidders exhibit ambiguity aversion. In contrast to sealed-bid auctions, in open auctions the bidders get information about the other bidders' private values and may therefore update their beliefs on the distribution of the values. The bidders have smooth ambiguity preferences and update their priors using consequentialist Bayesian updating. It is shown that ambiguity aversion usually affects bidding behavior the same way risk aversion does, but the main result is that this is not the case for continuous price descending auctions. This is new among a few theoretical cases where ambiguity aversion does not reinforce the risk aversion implications.
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Bibliographic InfoPaper provided by Tilburg University, Center for Economic Research in its series Discussion Paper with number 2012-022.
Date of creation: 2012
Date of revision:
Contact details of provider:
Web page: http://center.uvt.nl
Ambiguity; Auctions; Revenue Equivalence;
Find related papers by JEL classification:
- D03 - Microeconomics - - General - - - Behavioral Microeconomics; Underlying Principles
- D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
- D89 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Other
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-04-03 (All new papers)
- NEP-CTA-2012-04-03 (Contract Theory & Applications)
- NEP-MIC-2012-04-03 (Microeconomics)
- NEP-UPT-2012-04-03 (Utility Models & Prospect Theory)
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