Identity in a Second-price Sealed Bid Auction: An Experimental Investigation
Identity is a person’s sense of self, derived from her membership in a group. Previous experimental studies have shown that people take more favorable actions towards the members of their own group (in-group favoritism). This paper proposes a simple model of identity to capture this in-group favoritism in a private-value second-price sealed bid auction and reports the result of an experiment designed to test the predictions of the model. Consistent with the predictions, the data reveal that bids and seller revenue are higher when the seller belongs to the same group as the buyers compared to when the seller belong to a different group.
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