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Heterogeneous bids in auctions with rational and markdown bidders - Theory and Experiment

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Author Info

  • Oliver Kirchkamp

    ()
    (Universität Jena, School of Economics)

  • J. Philipp Reiß

    ()
    (Maastricht University, Economics Department)

Abstract

We present results from a series of experiments that allow us to measure overbidding and, in particular, underbidding in first-price auctions. We investigate how the amount of underbidding depends on seemingly innocent parameters of the experimental setup. To structure our data we present and test a theory of constant markdown bids. While a fraction of bidders can be well described by Bayesian Nash equilibrium bids, a larger fraction seems to either use constant markdown bids or seems to rationally optimise against a population where some members use markdown bids and some are rational.

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Bibliographic Info

Paper provided by Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics in its series Jena Economic Research Papers with number 2008-066.

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Date of creation: 01 Sep 2008
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Handle: RePEc:jrp:jrpwrp:2008-066

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Related research

Keywords: Auction; Experiment; Overbidding; Underbidding; Risk-Aversion;

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Cited by:
  1. repec:wyi:journl:002158 is not listed on IDEAS
  2. Tobias Scheffel & Georg Ziegler & Martin Bichler, 2012. "On the impact of package selection in combinatorial auctions: an experimental study in the context of spectrum auction design," Experimental Economics, Springer, vol. 15(4), pages 667-692, December.
  3. Roberto Cervone & Stefano Galavotti & Marco LiCalzi, 2009. "Symmetric Equilibria in Double Auctions with Markdown Buyers and Markup Sellers," Working Papers 187, Department of Applied Mathematics, Università Ca' Foscari Venezia.
  4. repec:fee:wpaper:1302 is not listed on IDEAS
  5. Shachat, Jason & Wei, Lijia, 2013. "Discrete Rule Learning and the Bidding of the Sexes," MPRA Paper 47953, University Library of Munich, Germany.

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