The overbidding-myth and the underbidding-bias in first-price auctions
AbstractExperiments with first price auctions find typically a substantial amount of overbidding which is often related to risk aversion. If this could be generalised then first-price auctions should generate a higher revenue then second-price auctions. We show that at least part of this overbidding is an artefact of common experimental setups which prevents bidders from underbidding. We compare various setups and identify conditions for underbidding and overbidding and study the effect on revenue.
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Bibliographic InfoPaper provided by Sonderforschungsbereich 504, Universität Mannheim & Sonderforschungsbereich 504, University of Mannheim in its series Sonderforschungsbereich 504 Publications with number 04-32.
Length: 20 pages
Date of creation: 07 Oct 2004
Date of revision:
Note: Financial support from the Deutsche Forschungsgemeinschaft, SFB 504, at the University of Mannheim, is gratefully acknowledged.
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- Axel Ockenfels & David Reiley & Abdolkarim Sadrieh, 2006. "Online Auctions," NBER Working Papers 12785, National Bureau of Economic Research, Inc.
- Kirchkamp, Oliver & Reiss, J. Philipp & Sadrieh, Abdolkarim, 2006.
"A pure variation of risk in first-price auctions,"
058, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).
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