Abstract
Consistent with a model of asymmetric risk aversion, subjects in first price auctions consistently bid above the risk neutral Nash prediction. It has been argued that this is due to low opportunity cost of deviating from the risk neutral bid. We increase opportunity cost (and payoff levels) by factors of 0, 1, 5, 10, and 20, from the normal levels generating payoffs up to $250 for risk neutral subjects and observe an insignificant increase in the slope of individual bid functions. The RMSE of bids declines significantly. This is consistent with a reward/decision cost model of bidding behavior.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: 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.
