English Versus Vickrey Auctions With Loss-Averse Bidders

Jonas von Wangenheim ()

CRC TR 224 Discussion Paper Series from University of Bonn and University of Mannheim, Germany

Abstract: Evidence suggests that people evaluate outcomes relative to expectations. I analyze this expectations-based loss aversion à la Köszegi and Rabin in the context of dynamic and static auctions, where the reference point is given by the (endogenous) equilibrium outcome. If agents update their reference point during the auction, the arrival of information crucially affects equilibrium behavior. Consequently, I show that - even with independent private values - the Vickrey auction yields strictly higher revenue than the (ascending clock) English auction, violating the well-known revenue equivalence.

Keywords: Vickrey auction; English auction; Japanese auction; expectationsbased loss aversion; revenue equivalence; dynamic loss aversion; personal equilibrium (search for similar items in EconPapers)
JEL-codes: D03 D44 (search for similar items in EconPapers)
Pages: 65
Date: 2021-07
New Economics Papers: this item is included in nep-des, nep-gth, nep-mic and nep-upt
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