Spite vs. risk: Explaining overbidding in the second-price all-pay auction

Oliver Kirchkamp and Wladislaw Mill

Games and Economic Behavior, 2021, vol. 130, issue C, 616-635

Abstract: We use an experiment to compare a theory of risk-aversion and a theory of spite as an explanation for overbidding in auctions. As a workhorse we use the second-price all-pay auction. Both risk and spite are used to rationalize deviations from risk-neutral equilibrium bids. We exploit that equilibrium predictions in the second-price all-pay auctions for spite are different than those for risk-aversion. We find that spite is a convincing explanation for bidding behavior for the second-price all-pay auction. Not only can spite rationalize observed bids, also our measure for spite is consistent with observed bids.

Keywords: Auction; Overbidding; Spite; Risk; Experiment (search for similar items in EconPapers)
JEL-codes: C72 C91 D44 D91 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:gamebe:v:130:y:2021:i:c:p:616-635

DOI: 10.1016/j.geb.2021.10.003

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