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The overbidding-myth and the underbidding-bias in first-price auctions

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Author Info
Kirchkamp, Oliver () (Sonderforschungsbereich 504)
Reiß, J. Philipp () (University of Magdeburg, Faculty of Economics and Management May 2004)

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Abstract

Experiments 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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Publisher Info
Paper provided by Sonderforschungsbereich 504, Universität Mannheim & Sonderforschungsbereich 504, University of Mannheim in its series Sonderforschungsbereich 504 Publications with number 04-32.

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Length: 20 pages
Date of creation: 07 Oct 2004
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Handle: RePEc:xrs:sfbmaa:04-32

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  1. Kirchkamp, Oliver & Reiss, J. Philipp & Sadrieh, Abdolkarim, 2008. "A pure variation of risk in private-value auctions," Research Memoranda 050, Maastricht : METEOR, Maastricht Research School of Economics of Technology and Organization. [Downloadable!]
  2. Kirchkamp, Oliver & Reiss, J. Philipp & Sadrieh, Abdolkarim, 2006. "A pure variation of risk in first-price auctions," Research Memoranda 058, Maastricht : METEOR, Maastricht Research School of Economics of Technology and Organization. [Downloadable!]
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