Abstract
Auctions are often used to sell idiosyncratic goods difficult for potential bidders to value ex ante. Laboratory auctions with uncertainty over final values in this experiment resulted in 18% and 27% of bids above the expected value of the item in private-value first-price and English auctions, respectively. Risk-seeking preferences as measured on an individual decision task cannot explain overbidding and the first-price auction results suggest that risk aversion may not be a good explanation for bidding behavior observed with certain values. Several candidate explanations fail to explain overbidding, rather it appears to stem from some bidders who are prone to overbidding. Relative to first-price auctions, the size and frequency of overbids are significantly larger in English auctions, while more English auctions are won by overbidders. Differences between the formats appear to be driven by the dynamic nature of English auctions which is consistent with popular notions of “auction fever.”
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Disclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.