Selection into auctions for risky and ambiguous prospects
We study experimentally the selection into first-price sealed-bid auctions for a risky or an ambiguous prospect. Most subjects chose to submit a bid for the risky prospect, leading to thinner markets for the ambiguous prospect. Transaction prices for both prospects were equal although subjects expected the ambiguous markets to be smaller. Evidence of a positive correlation between risk and ambiguity aversion suggests that the ambiguous markets were populated by relatively risk tolerant bidders. A control experiment with selection in a simple choice task shows that subjects correctly anticipate the effects of selection on market size and risk attitudes.
|Date of creation:||01 Apr 2010|
|Date of revision:|
|Contact details of provider:|| Postal: Norwich NR4 7TI|
Phone: 44 1603 591131
Fax: +44(0)1603 4562592
Web page: http://www.uea.ac.uk/economics
More information through EDIRC
|Order Information:|| Postal: Jessica Pointer, School of Economics, University of East Anglia, Norwich Research Park, Norwich, NR4 7TJ, UK|
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Jamison, Julian & Karlan, Dean S., 2009.
"When curiosity kills the profits: An experimental examination,"
Games and Economic Behavior,
Elsevier, vol. 66(2), pages 830-840, July.
- Julian Jamison & Dean S. Karlan, 2005. "When Curiosity Kills the Profits: an Experimental Examination," Experimental 0505001, EconWPA.
- Eugene F. Fama & Kenneth R. French, .
"Value versus Growth: The International Evidence,"
CRSP working papers
341, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
- Craig R. Fox & Amos Tversky, 1995. "Ambiguity Aversion and Comparative Ignorance," The Quarterly Journal of Economics, Oxford University Press, vol. 110(3), pages 585-603.
- Huang, Rocco R., 2007.
"Distance and trade: Disentangling unfamiliarity effects and transport cost effects,"
European Economic Review,
Elsevier, vol. 51(1), pages 161-181, January.
- Rocco Huang, 2005. "Distance and Trade: Disentangling unfamiliarity effects and transport cost effects," International Trade 0511010, EconWPA.
- Gary Charness & Uri Gneezy, 2010.
"Portfolio Choice And Risk Attitudes: An Experiment,"
Western Economic Association International, vol. 48(1), pages 133-146, 01.
- Charness, Gary & Gneezy, Uri, 2003. "Portfolio Choice and Risk Attitudes: An Experiment," University of California at Santa Barbara, Economics Working Paper Series qt7vz7w609, Department of Economics, UC Santa Barbara.
- Axel Ockenfels & Reinhard Selten, 2002.
"Impulse Balance Equilibrium and Feedback in First Price Auctions,"
Papers on Strategic Interaction
2002-12, Max Planck Institute of Economics, Strategic Interaction Group.
- Ockenfels, Axel & Selten, Reinhard, 2005. "Impulse balance equilibrium and feedback in first price auctions," Games and Economic Behavior, Elsevier, vol. 51(1), pages 155-170, April.
- Axel Ockenfels & Reinhard Selten, 2004. "Impulse Balance Equilibrium and Feedback in First Price Auctions," Working Paper Series in Economics 7, University of Cologne, Department of Economics.
- Charles A. Holt & Susan K. Laury, 2002. "Risk Aversion and Incentive Effects," American Economic Review, American Economic Association, vol. 92(5), pages 1644-1655, December.
- Radosveta Ivanova-Stenzel & Timothy C. Salmon, 2004.
"Bidder Preferences among Auction Institutions,"
Western Economic Association International, vol. 42(2), pages 223-236, April.
- Radosveta Ivanova-Stenzel & Timothy C. Salmon, 2004. "Bidder Preferences Among Auction Institutions," Experimental 0404005, EconWPA.
- Ivanova-Stenzel, Radosveta & Salmon, Tim, 2002. "Bidder preferences among auction institutions," SFB 373 Discussion Papers 2002,86, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
- Neugebauer, Tibor & Selten, Reinhard, 2006. "Individual behavior of first-price auctions: The importance of information feedback in computerized experimental markets," Games and Economic Behavior, Elsevier, vol. 54(1), pages 183-204, January.
- Yoram Halevy, 2007.
"Ellsberg Revisited: An Experimental Study,"
Econometric Society, vol. 75(2), pages 503-536, 03.
- Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer, vol. 10(2), pages 171-178, June.
- Raman Uppal & Tan Wang, 2003.
"Model Misspecification and Underdiversification,"
Journal of Finance,
American Finance Association, vol. 58(6), pages 2465-2486, December.
- Camerer, Colin & Kunreuther, Howard, 1989. "Experimental Markets for Insurance," Journal of Risk and Uncertainty, Springer, vol. 2(3), pages 265-99, September.
- Grimm, Veronika & Schmidt, Ulrich, 1998. "Equilibrium bidding without the independence axiom: A graphical analysis," SFB 373 Discussion Papers 1999,40, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
- David Easley & Maureen O'Hara, 2009. "Ambiguity and Nonparticipation: The Role of Regulation," Review of Financial Studies, Society for Financial Studies, vol. 22(5), pages 1817-1843, May.
- Camerer, Colin & Weber, Martin, 1992. "Recent Developments in Modeling Preferences: Uncertainty and Ambiguity," Journal of Risk and Uncertainty, Springer, vol. 5(4), pages 325-70, October.
- Janssen, Maarten C.W., 2006. "Auctions as coordination devices," European Economic Review, Elsevier, vol. 50(3), pages 517-532, April.
- Peter P. Wakker & Daniëlle R. M. Timmermans & Irma Machielse, 2007. "The Effects of Statistical Information on Risk and Ambiguity Attitudes, and on Rational Insurance Decisions," Management Science, INFORMS, vol. 53(11), pages 1770-1784, November.
- Kahn, Barbara E & Sarin, Rakesh K, 1988. " Modeling Ambiguity in Decisions under Uncertainty," Journal of Consumer Research, Oxford University Press, vol. 15(2), pages 265-72, September.
- Cox, James C. & Smith, Vernon L. & Walker, James M., 1982. "Auction market theory of heterogeneous bidders," Economics Letters, Elsevier, vol. 9(4), pages 319-325.
- Péter Esö & Lucy White, 2004.
"Precautionary Bidding in Auctions,"
Econometric Society, vol. 72(1), pages 77-92, 01.
- Peter Eso & Lucy White, 2001. "Precautionary Bidding in Auctions," Discussion Papers 1331, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Esö, Péter & White, Lucy, 2003. "Precautionary Bidding in Auctions," CEPR Discussion Papers 3975, C.E.P.R. Discussion Papers.
- Janssen, Maarten C.W. & Karamychev, Vladimir A., 2007. "Selection effects in auctions for monopoly rights," Journal of Economic Theory, Elsevier, vol. 134(1), pages 576-582, May.
- Hogarth, Robin M & Kunreuther, Howard, 1985. "Ambiguity and Insurance Decisions," American Economic Review, American Economic Association, vol. 75(2), pages 386-90, May.
- Theo Offerman & Jan Potters, 2006.
"Does Auctioning of Entry Licences Induce Collusion? An Experimental Study,"
Review of Economic Studies,
Oxford University Press, vol. 73(3), pages 769-791.
- Offerman, T.J.S. & Potters, J.J.M., 2006. "Does auctioning of entry licences induce collusions? An experimental study," Other publications TiSEM d72095fa-6c74-49a2-8c82-2, Tilburg University, School of Economics and Management.
- Chen, Yan & Katuscak, Peter & Ozdenoren, Emre, 2007. "Sealed bid auctions with ambiguity: Theory and experiments," Journal of Economic Theory, Elsevier, vol. 136(1), pages 513-535, September.
- Ganesh Iyer & Amit Pazgal, 2008. "Procurement bidding with restrictions," Quantitative Marketing and Economics, Springer, vol. 6(2), pages 177-204, June.
- Dufwenberg, Martin & Gneezy, Uri, 2002. "Information disclosure in auctions: an experiment," Journal of Economic Behavior & Organization, Elsevier, vol. 48(4), pages 431-444, August.
- Salo, Ahti A & Weber, Martin, 1995. "Ambiguity Aversion in First-Price Sealed-Bid Auctions," Journal of Risk and Uncertainty, Springer, vol. 11(2), pages 123-37, September.
When requesting a correction, please mention this item's handle: RePEc:uea:wcbess:10-06. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Theodore Turocy)
If references are entirely missing, you can add them using this form.