IDEAS home Printed from https://ideas.repec.org/p/fee/wpaper/1302.html
   My bibliography  Save this paper

Discrete Rule Learning and the Bidding of the Sexes

Author

Listed:
  • Jason Shachat

    (The Wang Yanan Institute for Studies in Economics and MOE Key Laboratory in Econometrics, Xiamen University)

  • Lijia Wei

    (School of Economics and Management,Wuhan University)

Abstract

We present a hidden Markov model of discrete strategic heterogeneity and learning in first price independent private values auctions. The model includes three latent bidding rules: constant absolute mark-up, constant percentage mark-up, and strategic best response. Rule switching probabilities depend upon a bidder's past auction outcomes. We apply this model to a new experiment that varies the number of bidders, the auction frame between forward and reverse, and includes the collection of saliva samples - used to measure subjects' sex hormone levels. We find the proportion of bidders following constant absolute mark-up increases with experience, particularly when the number of bidders is large. The primary driver here is subjects' increased propensity to switch strategies when they experience a loss (win) reinforcement when following a strategic (heuristic) rule. This affect is stronger for women and leads them spend more time following boundedly rational rules. We also find women in the Luteal and Menstrual phases of their menstrual cycle bid less aggressively, in terms of surplus demanded, when following the best response rule. This combined with spending more time following simple rules of thumbs explains gender differences in earnings.

Suggested Citation

  • Jason Shachat & Lijia Wei, 2013. "Discrete Rule Learning and the Bidding of the Sexes," Working Papers 1302, Xiamen Unversity, The Wang Yanan Institute for Studies in Economics, Finance and Economics Experimental Laboratory, revised 02 Jul 2013.
  • Handle: RePEc:fee:wpaper:1302
    as

    Download full text from publisher

    File URL: http://feel.xmu.edu.cn/RePEc/wpaper/Discrete_Rule_Learning_and_the_Bidding_of_the_Sexes.pdf
    File Function: 2013
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. David Gill & Victoria Prowse, 2014. "Gender differences and dynamics in competition: The role of luck," Quantitative Economics, Econometric Society, vol. 5, pages 351-376, July.
    2. Mark Isaac & Svetlana Pevnitskaya & Kurt S. Schnier, 2012. "Individual Behavior And Bidding Heterogeneity In Sealed Bid Auctions Where The Number Of Bidders Is Unknown," Economic Inquiry, Western Economic Association International, vol. 50(2), pages 516-533, April.
    3. Pearson, Matthew & Schipper, Burkhard C., 2013. "Menstrual cycle and competitive bidding," Games and Economic Behavior, Elsevier, vol. 78(C), pages 1-20.
    4. Chen, Yan & Katuščák, Peter & Ozdenoren, Emre, 2013. "Why canʼt a woman bid more like a man?," Games and Economic Behavior, Elsevier, vol. 77(1), pages 181-213.
    5. Erev, Ido & Roth, Alvin E, 1998. "Predicting How People Play Games: Reinforcement Learning in Experimental Games with Unique, Mixed Strategy Equilibria," American Economic Review, American Economic Association, vol. 88(4), pages 848-881, September.
    6. Goeree, Jacob K. & Holt, Charles A. & Palfrey, Thomas R., 2002. "Quantal Response Equilibrium and Overbidding in Private-Value Auctions," Journal of Economic Theory, Elsevier, vol. 104(1), pages 247-272, May.
    7. Vincent P. Crawford & Nagore Iriberri, 2007. "Level-k Auctions: Can a Nonequilibrium Model of Strategic Thinking Explain the Winner's Curse and Overbidding in Private-Value Auctions?," Econometrica, Econometric Society, vol. 75(6), pages 1721-1770, November.
    8. Jason Shachat & Lijia Wei, 2012. "Procuring Commodities: First-Price Sealed-Bid or English Auctions?," Marketing Science, INFORMS, vol. 31(2), pages 317-333, March.
    9. Marco Casari & John C. Ham & John H. Kagel, 2007. "Selection Bias, Demographic Effects, and Ability Effects in Common Value Auction Experiments," American Economic Review, American Economic Association, vol. 97(4), pages 1278-1304, September.
    10. McKelvey Richard D. & Palfrey Thomas R., 1995. "Quantal Response Equilibria for Normal Form Games," Games and Economic Behavior, Elsevier, vol. 10(1), pages 6-38, July.
    11. Oaxaca, Ronald, 1973. "Male-Female Wage Differentials in Urban Labor Markets," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 14(3), pages 693-709, October.
    12. Kagel, John H & Levin, Dan, 1993. "Independent Private Value Auctions: Bidder Behaviour in First-, Second- and Third-Price Auctions with Varying Numbers of Bidders," Economic Journal, Royal Economic Society, vol. 103(419), pages 868-879, July.
    13. Alan S. Blinder, 1973. "Wage Discrimination: Reduced Form and Structural Estimates," Journal of Human Resources, University of Wisconsin Press, vol. 8(4), pages 436-455.
    14. Werner G¸th & Radosveta Ivanova-Stenzel & Manfred K–nigstein & Martin Strobel, 2003. "Learning to bid - an experimental study of bid function adjustments in auctions and fair division games," Economic Journal, Royal Economic Society, vol. 113(487), pages 477-494, April.
    15. Burkhard C. Schipper, 2015. "Sex Hormones and Competitive Bidding," Management Science, INFORMS, vol. 61(2), pages 249-266, February.
    16. Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer;Economic Science Association, vol. 10(2), pages 171-178, June.
    17. Filardo, Andrew J. & Gordon, Stephen F., 1998. "Business cycle durations," Journal of Econometrics, Elsevier, vol. 85(1), pages 99-123, July.
    18. John Geweke, 1991. "Evaluating the accuracy of sampling-based approaches to the calculation of posterior moments," Staff Report 148, Federal Reserve Bank of Minneapolis.
    19. Neugebauer, Tibor & Selten, Reinhard, 2006. "Individual behavior of first-price auctions: The importance of information feedback in computerized experimental markets," Games and Economic Behavior, Elsevier, vol. 54(1), pages 183-204, January.
    20. Oliver Kirchkamp & J. Philipp Reiß, 2008. "Heterogeneous bids in auctions with rational and markdown bidders - Theory and Experiment," Jena Economics Research Papers 2008-066, Friedrich-Schiller-University Jena.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Breitmoser, Yves, 2019. "Knowing me, imagining you: Projection and overbidding in auctions," Games and Economic Behavior, Elsevier, vol. 113(C), pages 423-447.
    2. Breitmoser, Yves, 2017. "Knowing Me, Imagining You:," Rationality and Competition Discussion Paper Series 36, CRC TRR 190 Rationality and Competition.
    3. Jason Shachat & Lijia Wei, 2012. "Procuring Commodities: First-Price Sealed-Bid or English Auctions?," Marketing Science, INFORMS, vol. 31(2), pages 317-333, March.
    4. repec:wyi:journl:002158 is not listed on IDEAS
    5. Oliver Kirchkamp & Wladislaw Mill, 2019. "Spite vs. risk: explaining overbidding," CESifo Working Paper Series 7631, CESifo.
    6. 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.
    7. Yves Breitmoser & Sebastian Schweighofer-Kodritsch, 2022. "Obviousness around the clock," Experimental Economics, Springer;Economic Science Association, vol. 25(2), pages 483-513, April.
    8. Kirchkamp, O. & Reiss, J.P. & Sadrieh, A., 2008. "A pure variation of risk in private-value auctions," Research Memorandum 050, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).
    9. Sascha Füllbrunn & Tibor Neugebauer, 2013. "Varying the number of bidders in the first-price sealed-bid auction: experimental evidence for the one-shot game," Theory and Decision, Springer, vol. 75(3), pages 421-447, September.
    10. Tibor Neugebauer, 2007. "Bid and price effects of increased competition in the first-price auction: experimental evidence," LSF Research Working Paper Series 07-17, Luxembourg School of Finance, University of Luxembourg.
    11. Maurizio Canavari & Andreas C. Drichoutis & Jayson L. Lusk & Rodolfo M. Nayga, Jr., 2018. "How to run an experimental auction: A review of recent advances," Working Papers 2018-5, Agricultural University of Athens, Department Of Agricultural Economics.
    12. F. Javier Otamendi & Isabelle Brocas & Juan D. Carrillo, 2018. "Sequential Auctions with Capacity Constraints: An Experimental Investigation," Games, MDPI, vol. 9(1), pages 1-31, March.
    13. Diego Aycinena & Hernán Bejarano & Lucas Rentschler, 2018. "Informed entry in auctions," International Journal of Game Theory, Springer;Game Theory Society, vol. 47(1), pages 175-205, March.
    14. Sotiris Georganas & Dan Levin & Peter McGee, 2017. "Optimistic irrationality and overbidding in private value auctions," Experimental Economics, Springer;Economic Science Association, vol. 20(4), pages 772-792, December.
    15. Lorentziadis, Panos L., 2016. "Optimal bidding in auctions from a game theory perspective," European Journal of Operational Research, Elsevier, vol. 248(2), pages 347-371.
    16. David J. Cooper & Hanming Fang, 2008. "Understanding Overbidding in Second Price Auctions: An Experimental Study," Economic Journal, Royal Economic Society, vol. 118(532), pages 1572-1595, October.
    17. Breitmoser, Yves & Schweighofer-Kodritsch, Sebastian, 2019. "Obviousness around the clock," Discussion Papers, Research Unit: Market Behavior SP II 2019-203, WZB Berlin Social Science Center.
    18. Boosey, Luke & Brookins, Philip & Ryvkin, Dmitry, 2017. "Contests with group size uncertainty: Experimental evidence," Games and Economic Behavior, Elsevier, vol. 105(C), pages 212-229.
    19. Pearson, Matthew & Schipper, Burkhard C., 2013. "Menstrual cycle and competitive bidding," Games and Economic Behavior, Elsevier, vol. 78(C), pages 1-20.
    20. Grundl, Serafin & Zhu, Yu, 2023. "Robust inference in first-price auctions: Overbidding as an identifying restriction," Journal of Econometrics, Elsevier, vol. 235(2), pages 484-506.
    21. Llorente-Saguer, Aniol & Sheremeta, Roman M. & Szech, Nora, 2023. "Designing contests between heterogeneous contestants: An experimental study of tie-breaks and bid-caps in all-pay auctions," European Economic Review, Elsevier, vol. 154(C).

    More about this item

    Keywords

    Private values auction; Discrete heterogeneity; Learning; Gender difference;
    All these keywords.

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • D87 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Neuroeconomics

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fee:wpaper:1302. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Ashford (email available below). General contact details of provider: https://edirc.repec.org/data/wixmucn.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.