IDEAS home Printed from https://ideas.repec.org/a/ecm/emetrp/v75y2007i6p1721-1770.html

Level-k Auctions: Can a Nonequilibrium Model of Strategic Thinking Explain the Winner's Curse and Overbidding in Private-Value Auctions?

Author

Listed:
  • Vincent P. Crawford
  • Nagore Iriberri

Abstract

This paper proposes a structural nonequilibrium model of initial responses to incomplete-information games based on "level-k" thinking, which describes behavior in many experiments with complete-information games. We derive the model's implications in first- and second-price auctions with general information structures, compare them to equilibrium and Eyster and Rabin's (2005) "cursed equilibrium," and evaluate the model's potential to explain nonequilibrium bidding in auction experiments. The level-k model generalizes many insights from equilibrium auction theory. It allows a unified explanation of the winner's curse in common-value auctions and overbidding in those independent-private-value auctions without the uniform value distributions used in most experiments. Copyright The Econometric Society 2007.

Suggested Citation

  • Vincent P. Crawford & Nagore Iriberri, 2007. "Level-k Auctions: Can a Nonequilibrium Model of Strategic Thinking Explain the Winner's Curse and Overbidding in Private-Value Auctions?," Econometrica, Econometric Society, vol. 75(6), pages 1721-1770, November.
    • Handle: RePEc:ecm:emetrp:v:75:y:2007:i:6:p:1721-1770
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1111/j.1468-0262.2007.00810.x
    File Function: link to full text
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or

    for a different version of it.

    Other versions of this item:

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ecm:emetrp:v:75:y:2007:i:6:p:1721-1770. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://edirc.repec.org/data/essssea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.