The Dollar Auction Game: A laboratory comparison between Individuals and Groups

Andrea Morone, Simone Nuzzo and Rocco Caferra

EconStor Preprints from ZBW - Leibniz Information Centre for Economics

Abstract: The aim of this paper is to analyze bidders’ behavior, comparing individuals and groups’ decisions within the dollar auction framework. This game induces subjects to fall prey into the paradigm of escalation, which is driven by agents’ commitment to higher and higher bids. Whenever each participant commits himself to a bid, the lower bidder, motivated by the wish to win as well as to defend his prior investment, finds it in his best interest to place a higher bid to overcome his opponent. The latter mechanism may lead subjects to overbid. We find that the Nash equilibrium of the game is only rarely attained. Second, we detect clean evidence that groups’ decisions are, on average, superior to individuals’ decisions. Learning over time is clearly evident, leading individuals to perform nearly as good as groups in the final rounds of the game.

Keywords: escalation; winner’s curse (search for similar items in EconPapers)
JEL-codes: C91 (search for similar items in EconPapers)
Date: 2017
New Economics Papers: this item is included in nep-des, nep-exp, nep-gth and nep-pay
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https://www.econstor.eu/bitstream/10419/170728/3/MNC.pdf (application/pdf)

Related works:
Journal Article: The Dollar Auction Game: A Laboratory Comparison Between Individuals and Groups (2019)
Working Paper: The Dollar Auction Game: A laboratory comparison between Individuals and Groups (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:esprep:170728

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