Competition between friends and foes

Abstract

While social preferences have been shown to be an important predictor in economic decision-making, they have been largely ignored in describing auction behavior. We build on theoretical models of spiteful bidding to test experimentally whether the opponent’s identity impact bidding behavior in an auction. For that purpose, we collect data on competitions – in the form of first-price auctions – between Donald Trump and Hillary Clinton voters. We show that the opponent’s identity – i.e., the competitor supports the same candidate (friend) or the competitor supports another candidate (foe) – influences auction behavior. Clinton voters compete more aggressively against Trump voters than against fellow Clinton voters. Data on attitudes suggests that spite might be driving this behavior. Trump voters, on the other hand, compete less aggressively against Clinton voters than against fellow Trump voters, which is explained by Trump voters’ correct anticipation of their opponent’s strategy. The overall behavior of Clinton and Trump voters is consistent with a model of asymmetric spiteful bidding. We conclude that preferences over the opponent seem to influence behavior even in a competitive setting.