Bidding with Outside Options
AbstractWe introduce and experimentally test an auction model that allows for outside options of bidders as substitutes for the auctioned object under the private values assumption. Theoretically and in the experiments, bidders respond to their individual outside options and to variations of common knowledge about competitors outside options. Interestingly, private outside options induce concave equilibrium bidding functions with uniformly distributed valuations. The bidding data does support this property. As theoretically predicted, lower-valued outside options lead individuals to bid more aggressively in the experiments.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Sonderforschungsbereich 504, Universität Mannheim & Sonderforschungsbereich 504, University of Mannheim in its series Sonderforschungsbereich 504 Publications with number 04-21.
Length: 30 pages
Date of creation: 08 Jun 2004
Date of revision:
Note: Financial support from the Deutsche Forschungsgemeinschaft, SFB 504, at the University of Mannheim, is gratefully acknowledged. We thank Rachel Croson, Dan Friedman, Johanna Goertz, and Stefan Trautmann for helpful comments and stimulating discussions.
Contact details of provider:
Postal: D-68131 Mannheim
Phone: (49) (0) 621-292-2547
Fax: (49) (0) 621-292-5594
Web page: http://www.sfb504.uni-mannheim.de/
More information through EDIRC
Web page: http://www.sfb504.uni-mannheim.de
This paper has been announced in the following NEP Reports:
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Palfrey, Thomas R. & Pevnitskaya, Svetlana, 2003.
"Endogenous Entry and Self-selection in Private Value Auctions: An Experimental Study,"
1172, California Institute of Technology, Division of the Humanities and Social Sciences.
- Palfrey, Thomas R. & Pevnitskaya, Svetlana, 2008. "Endogenous entry and self-selection in private value auctions: An experimental study," Journal of Economic Behavior & Organization, Elsevier, vol. 66(3-4), pages 731-747, June.
- Oliver Kirchkamp, & Philipp Reiß, 2006. "Expectations in first-price auctions," CRIEFF Discussion Papers 0609, Centre for Research into Industry, Enterprise, Finance and the Firm.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Carsten Schmidt).
If references are entirely missing, you can add them using this form.