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A novel experimental test of truthful bidding in second-price auctions with real objects

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  • Rosato, Antonio
  • Tymula, Agnieszka

Abstract

We present experimental evidence on bidding in second-price auctions with real objects. Our novel design, combining a second-price auction with an individual-specific binary choice task based on the outcome of the auction, allows us to directly identify over and under-bidding. We analyze bidding in real-object and induced-value auctions, and find significant deviations from truthful bidding in both. Overall, under-bidding is somewhat more prevalent than over-bidding; yet, the latter has a bigger magnitude, especially with induced values. At the individual level, we find no relation between the tendency to deviate from truthful bidding in induced-value vs. real-object auctions.

Suggested Citation

  • Rosato, Antonio & Tymula, Agnieszka, 2022. "A novel experimental test of truthful bidding in second-price auctions with real objects," MPRA Paper 115427, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:115427
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    File URL: https://mpra.ub.uni-muenchen.de/115427/1/MPRA_paper_115427.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    second-price auctions; overbidding; consumer surplus;
    All these keywords.

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • D92 - Microeconomics - - Micro-Based Behavioral Economics - - - Intertemporal Firm Choice, Investment, Capacity, and Financing

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