Sophisticated Bidders in Beauty-Contest Auctions

Stefano Galavotti (), Luigi Moretti and Paola Valbonesi

Documents de travail du Centre d'Economie de la Sorbonne from Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne

Abstract: We study bidding behavior by firms in beauty-contest auctions, i.e. auctions in which the winning bid is the one which gets closet to some function (average) of all submitted bids. Using a dataset on public procurement beauty-contest auctions, we show that firms' observed bidding behavior departs from equilibrium and can be predicted by a sophistication index, which captures the firms' accumulated capacity of bidding close to optimality in the past. We show that our empirical evidence is consistent with a Cognitive Hierarchy model of bidders' behavior. We also investigate whether and how firms learn to bid strategically through experience

Keywords: cognitive hierarchy; auctions; beauty-contest; public procurement (search for similar items in EconPapers)
JEL-codes: C70 D01 D44 D83 H57 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2017-01
New Economics Papers: this item is included in nep-exp and nep-gth
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Downloads: (external link)
ftp://mse.univ-paris1.fr/pub/mse/CES2017/17003.pdf (application/pdf)

Related works:
Journal Article: Sophisticated Bidders in Beauty-Contest Auctions (2018)
Working Paper: Sophisticated Bidders in Beauty-Contest Auctions (2018)
Working Paper: Sophisticated Bidders in Beauty-Contest Auctions (2018)
Working Paper: Sophisticated Bidders in Beauty-Contest Auctons (2017)
Working Paper: Sophisticated Bidders in Beauty-Contest Auctons (2017)
Working Paper: Sophisticated Bidders In Beauty-Contest Auctions (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:mse:cesdoc:17003

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