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Bidding behavior given point and interval values in a second-price auction

Prasenjit Banerjee and Jason Shogren

Journal of Economic Behavior & Organization, 2014, vol. 97, issue C, 126-137

Abstract: Although rational choice theory presumes people have a point estimate of their willingness to pay (WTP) for a good or service, the idea of coherent arbitrariness suggests they have an interval of values. Herein we explore bidding behavior in a second-price auction in which bidders have point or interval values and point or interval bidding. We find bidders bid rationally: (i) when bidders have a point value but are asked to state an interval bid, they choose to bid as an interval with the point value as the mean of the interval; (ii) bidders who had a value interval but are asked to bid as a point estimate bid the expected value from the interval; and (iii) bidders with an interval value and who bid an interval such that expected bids equate expected values.

Keywords: Preference elicitation; Interval values; Second price auction; Bidding behavior (search for similar items in EconPapers)
JEL-codes: C91 D44 D46 Q51 (search for similar items in EconPapers)
Date: 2014
References: Add references at CitEc
Citations: View citations in EconPapers (7)

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Working Paper: Bidding Behavior given Point and Interval Values in a Second-price Auction (2013) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:97:y:2014:i:c:p:126-137

DOI: 10.1016/j.jebo.2013.10.002

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Journal of Economic Behavior & Organization is currently edited by Houser, D. and Puzzello, D.

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