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Elicited bid functions in (a)symmetric first-price auctions

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Abstract

We report on a series of experiments that examine bidding behavior in first-price sealed bid auctions with symmetric and asymmetric bidders. To study the extent of strategic behavior, we use an experimental design that elicits bidders' complete bid functions in each round (auction) of the experiment. In the aggregate, behavior is consistent with the basic equilibrium predictions for risk neutral or homogenous risk averse bidders (extent of bid shading, average seller's revenues and deviations from equilibrium). However, when we look at the extent of best reply behavior and the shape of bid functions, we find that individual behavior is not in line with the received equilibrium models, although it exhibits strategic sophistication.

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  • Paul Pezanis-Christou & Abdolkarim Sadrieh, 2003. "Elicited bid functions in (a)symmetric first-price auctions," UFAE and IAE Working Papers 578.03, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
  • Handle: RePEc:aub:autbar:578.03
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    1. John C. Harsanyi & Reinhard Selten, 1988. "A General Theory of Equilibrium Selection in Games," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262582384, January.
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    Cited by:

    1. Charness, Gary & Rabin, Matthew, 2005. "Expressed preferences and behavior in experimental games," Games and Economic Behavior, Elsevier, vol. 53(2), pages 151-169, November.
    2. Sascha Füllbrunn & Tibor Neugebauer, 2013. "Varying the number of bidders in the first-price sealed-bid auction: experimental evidence for the one-shot game," Theory and Decision, Springer, pages 421-447.
    3. Olivier Armantier & Nicolas Treich, 2006. "Overbidding in Independant Private-Values Auctions and Misperception of Probabilities," CIRANO Working Papers 2006s-15, CIRANO.
    4. Kirchkamp, Oliver & Poen, Eva & Reiß, J. Philipp, 2004. "Bidding with outside options," Papers 04-21, Sonderforschungsbreich 504.
    5. Kirchkamp, Oliver & Poen, Eva & Rei, J. Philipp, 2009. "Outside options: Another reason to choose the first-price auction," European Economic Review, Elsevier, vol. 53(2), pages 153-169, February.
    6. Tibor Neugebauer, 2007. "Bid and price effects of increased competition in the first-price auction: experimental evidence," LSF Research Working Paper Series 07-17, Luxembourg School of Finance, University of Luxembourg.
    7. Kirchkamp, Oliver & Reiss, J. Philipp & Sadrieh, Abdolkarim, 2008. "A pure variation of risk in private-value auctions," Research Memorandum 050, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).

    More about this item

    Keywords

    Asymmetric first-price auctions; private independent values; elicited bid functions; constant relative risk aversion; empirical best replies; experimental methods;

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • C9 - Mathematical and Quantitative Methods - - Design of Experiments

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