THE EVOLUTION OF BIDDING BEHAVIOR IN PRIVATE-VALUES AUCTIONS AND DOUBLE AUCTIONS

Roberto Serrano () and Rene Saran ()
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Rene Saran: CEMFI, Centro de Estudios Monetarios y Financieros

Working Papers from CEMFI

Abstract: We apply stochastic stability to study the evolution of bidding behaviour in private-value second-price, first-price and k-double auctions. The learning process has a strong component of inertia but with a small probability, the bids are modified in the direction of ex-post regrets. We identify essentially a unique bid that will be used by each type in the long run. In the second-price auction, this is the truthful bid. In the first-price auction, bidding half of one’s valuation is stable. The stable bid in the k-double auction is a toughening of the Chatterjee-Samuelson linear equilibrium strategy. If we add a friction in changing one’s dib, then truth-telling behaviour is also obtained in the firstprice and k-double auctions. Intuitively, the stochastically stable bid minimizes the maximal regret.

Keywords: Stochastic stability; ex-post regret; second-price auction; first-price auction; k-double auction. (search for similar items in EconPapers)
JEL-codes: C73 C78 D44 D83 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cta, nep-gth and nep-ore
Date: 2007-08
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Related works:
Working Paper: The Evolution of Bidding Behavior in Private-Values Auction and Double Auctions (2007)
Working Paper: The evolution of bidding behavior in private-values auctions and double auctions (2007)
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Persistent link: http://EconPapers.repec.org/RePEc:cmf:wpaper:wp2007_0712

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