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Auctions with Anticipated Regret

Author

Listed:
  • Emel Filiz

    (Columbia University, Economics Department)

  • Erkut Y. Ozbay

    (New York University, Economics Department)

Abstract

This paper demonstrates theoretically and experimentally that in first price auctions, overbidding with respect to risk neutral Nash equilibrium might be driven from anticipated loser regret (felt when bidders lose at an affordable price). Different information structures are created to elicit regret: bidders know they will learn the winning bid if they lose (loser regret condition); or the second highest bid if they win (winner regret condition); or no information regarding the other bids. Bidders only in loser regret condition anticipated regret and significantly overbid; in the other conditions bidders did not anticipate regret and hence did not overbid.

Suggested Citation

  • Emel Filiz & Erkut Y. Ozbay, 2005. "Auctions with Anticipated Regret," Experimental 0511006, EconWPA.
  • Handle: RePEc:wpa:wuwpex:0511006
    Note: Type of Document - pdf; pages: 39
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    File URL: https://econwpa.ub.uni-muenchen.de/econ-wp/exp/papers/0511/0511006.pdf
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    References listed on IDEAS

    as
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    Cited by:

    1. Andreas Roider & Patrick W. Schmitz, 2012. "Auctions with Anticipated Emotions: Overbidding, Underbidding, and Optimal Reserve Prices," Scandinavian Journal of Economics, Wiley Blackwell, vol. 114(3), pages 808-830, September.
    2. Theodore L. Turocy & Elizabeth Watson, 2012. "Reservation Values and Regret in Laboratory First-Price Auctions: Context and Bidding Behavior," Southern Economic Journal, Southern Economic Association, vol. 78(4), pages 1163-1180, April.
    3. Dirk Bergemann & Karl Schlag, 2012. "Robust Monopoly Pricing," World Scientific Book Chapters,in: Robust Mechanism Design The Role of Private Information and Higher Order Beliefs, chapter 13, pages 417-441 World Scientific Publishing Co. Pte. Ltd..
    4. Bernard, Mark, 2010. "Level-k reasoning in contests," Economics Letters, Elsevier, vol. 108(2), pages 149-152, August.

    More about this item

    Keywords

    overbidding; first price auction; anticipated regret;

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior

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