Ambiguity and Ambiguity Attitudes across Auctions

Studies of ambiguity perceptions and attitudes are moving beyond the Ellsberg urn to examine people’s responses to ambiguity in naturally occurring events, games, and financial markets. In this study, we measure ambiguity perceptions and attitudes for market prices and allocations in four classical auction formats (first-price and second-price sealed bid auctions, English and Dutch clock auctions). We find ambiguity attitudes, representing individual preferences, are stable across auctions. However, the perceived ambiguity surrounding auction prices is lowest for English clock auctions which are obviously strategyproof (OSP), followed by second-price auctions which are strategyproof (SP), followed by a tie between first-price and Dutch clock auctions which are not strategyproof. Viewing OSP mechanisms as strategically simpler than SP mechanisms, and SP as strategically simpler than non-strategyproof mechanisms, our findings suggest ambiguity increases with strategic complexity. For allocations, we find perceived ambiguity is high for all four auction formats.