Investment Incentives in Auctions: An Experiment
AbstractWe experimentally analyze first and second price auctions where one bidder can achieve a comparative advantage by investment prior to the auction. We find that, as predicted by theory, bidders invest more often prior to second price auctions than prior to first price auctions. In both auction formats bidding is more aggressive than the equilibrium prediction. However, bidding is closer to equilibrium than in control treatments where the comparative advantage is exogenous.
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Bibliographic InfoPaper provided by University of Cologne, Department of Economics in its series Working Paper Series in Economics with number 26.
Date of creation: 06 Jun 2006
Date of revision:
Auctions; Investment Incentives; Asymmetric Auctions; Experimental Economics;
Find related papers by JEL classification:
- D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
- C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-06-17 (All new papers)
- NEP-COM-2006-06-17 (Industrial Competition)
- NEP-EXP-2006-06-17 (Experimental Economics)
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