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English Versus Vickrey Auctions With Loss-Averse Bidders

Author

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  • Jonas von Wangenheim

Abstract

Evidence suggests that people evaluate outcomes relative to expectations. I analyze this expectations-based loss aversion à la Köszegi and Rabin in the context of dynamic and static auctions, where the reference point is given by the (endogenous) equilibrium outcome. If agents update their reference point during the auction, the arrival of information crucially affects equilibrium behavior. Consequently, I show that - even with independent private values - the Vickrey auction yields strictly higher revenue than the (ascending clock) English auction, violating the well-known revenue equivalence.

Suggested Citation

  • Jonas von Wangenheim, 2021. "English Versus Vickrey Auctions With Loss-Averse Bidders," CRC TR 224 Discussion Paper Series crctr224_2021_313, University of Bonn and University of Mannheim, Germany.
    • Handle: RePEc:bon:boncrc:crctr224_2021_313
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    File URL: https://www.crctr224.de/research/discussion-papers/archive/dp313
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    Cited by:

    1. Rosato, Antonio, 2023. "Loss aversion in sequential auctions," Theoretical Economics, Econometric Society, vol. 18(2), May.
    2. Vincent Meisner & Jonas von Wangenheim, 2022. "Loss aversion in strategy-proof school-choice mechanisms," Papers 2207.14666, arXiv.org.
    3. Meisner, Vincent & von Wangenheim, Jonas, 2023. "Loss aversion in strategy-proof school-choice mechanisms," Journal of Economic Theory, Elsevier, vol. 207(C).

    More about this item

    Keywords

    Vickrey auction; English auction; Japanese auction; expectationsbased loss aversion; revenue equivalence; dynamic loss aversion; personal equilibrium;
    All these keywords.

    JEL classification:

    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions

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