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Spite and Reciprocity in Auctions

Author

Listed:
  • Naoko Nishimura

    () (Department of Economics, Shinshu University, Matsumoto, Nagano 390-8621, Japan)

  • Timothy N. Cason

    () (Department of Economics, Purdue University, West Lafayette, IN 47907-2076, USA)

  • Tatsuyoshi Saijo

    () (ISER, Osaka University, Ibaraki, 567-0047, Japan
    CASSEL, University of California—Los Angeles, Los Angeles, CA 90095-1484, USA)

  • Yoshikazu Ikeda

    () (Department of Economics, University of Kitakyushu, Kitakyushu, Fukuoka 802-0841, Japan)

Abstract

The paper presents a complete information model of bidding in second price sealed-bid and ascending-bid (English) auctions, in which potential buyers know the unit valuation of other bidders and may spitefully prefer that their rivals earn a lower surplus. Bidders with spiteful preferences should overbid in equilibrium when they know their rival has a higher value than their own, and bidders with a higher value underbid to reciprocate the spiteful overbidding of the lower value bidders. The model also predicts different bidding behavior in second price as compared to ascending-bid auctions. The paper also presents experimental evidence broadly consistent with the model. In the complete information environment, lower value bidders overbid more than higher value bidders, and they overbid more frequently in the second price auction than in the ascending price auction. Overall, the lower value bidder submits bids that exceed value about half the time. These patterns are not found in the incomplete information environment, consistent with the model.

Suggested Citation

  • Naoko Nishimura & Timothy N. Cason & Tatsuyoshi Saijo & Yoshikazu Ikeda, 2011. "Spite and Reciprocity in Auctions," Games, MDPI, Open Access Journal, vol. 2(3), pages 1-47, September.
  • Handle: RePEc:gam:jgames:v:2:y:2011:i:3:p:365-411:d:13998
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    References listed on IDEAS

    as
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    Citations

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    Cited by:

    1. Bierbrauer, Felix & Netzer, Nick, 2016. "Mechanism design and intentions," Journal of Economic Theory, Elsevier, vol. 163(C), pages 557-603.
    2. Todd R. Kaplan & Shmuel Zamir, 2014. "Advances in Auctions," Discussion Papers 1405, Exeter University, Department of Economics.
    3. Sadrieh, Abdolkarim & Schröder, Marina, 2017. "Acts of helping and harming," Economics Letters, Elsevier, vol. 153(C), pages 77-79.
    4. Kassas, Bachir & Palma, Marco & Ness, Meghan & Anderson, David, 2017. "Fine-Tuning Willingness-To-Pay Estimates in Second Price Auctions," 2017 Annual Meeting, February 4-7, 2017, Mobile, Alabama 252793, Southern Agricultural Economics Association.
    5. Björn Bartling & Tobias Gesche & Nick Netzer, 2017. "Does the absence of human sellers bias bidding behavior in auction experiments?," Journal of the Economic Science Association, Springer;Economic Science Association, vol. 3(1), pages 44-61, July.
    6. Kimbrough Erik O. & Reiss J. Philipp, 2012. "Measuring the Distribution of Spitefulness," Research Memorandum 040, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).
    7. Bartling, Björn & Netzer, Nick, 2016. "An externality-robust auction: Theory and experimental evidence," Games and Economic Behavior, Elsevier, vol. 97(C), pages 186-204.
    8. repec:eee:ecolet:v:161:y:2017:i:c:p:71-73 is not listed on IDEAS
    9. Kaplan, Todd R. & Zamir, Shmuel, 2015. "Advances in Auctions," Handbook of Game Theory with Economic Applications, Elsevier.
    10. Che, Yeon-Koo & Choi, Syngjoo & Kim, Jinwoo, 2017. "An experimental study of sponsored-search auctions," Games and Economic Behavior, Elsevier, vol. 102(C), pages 20-43.

    More about this item

    Keywords

    ascending-bid auction; second price auction; experiment; dominant strategy; social preferences; spite; reciprocity; English auction;

    JEL classification:

    • C - Mathematical and Quantitative Methods
    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
    • C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
    • C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games

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