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Learning to bid - an experimental study of bid function adjustments in auctions and fair division games

Author

Listed:
  • Werner G¸th
  • Radosveta Ivanova-Stenzel
  • Manfred K–nigstein
  • Martin Strobel

Abstract

We examine learning behaviour in auction and fair division experiments with independent private values under two different price rules, first and second price. Participants play all four games repeatedly and submit complete bid functions rather than single bids. This allows us to study how institutional changes are anticipated and whether learning is influenced by the structural differences between games. We find that learning does not drive bidding towards the benchmark solution. Bid functions are adjusted globally rather than locally. Directional learning theory offers a partial explanation for bid changes. The data support a cognitive approach to learning. Copyright 2003 Royal Economic Society.

Suggested Citation

  • Werner G¸th & Radosveta Ivanova-Stenzel & Manfred K–nigstein & Martin Strobel, 2003. "Learning to bid - an experimental study of bid function adjustments in auctions and fair division games," Economic Journal, Royal Economic Society, vol. 113(487), pages 477-494, April.
    • Handle: RePEc:ecj:econjl:v:113:y:2003:i:487:p:477-494
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    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior

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