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THEORY AND MISBEHAVIOR OF FIRST-PRICE AUCTIONS: THE IMPORTANCE OF INFORMATION FEEDBACK IN EXPERIMENTAL MARKETS

Tibor Neugebauer and Javier Perote ()

Experimental from EconWPA

Abstract: This article reports the results of a market experiment designed to test the predictions of the constant relative risk aversion model and to study the importance of information feedback in repeated first-price sealed-bid auctions. The data reveal that introduction of price information feedback implies a significant change of individual behavior. Without price information feedback, the data support the risk neutral Nash equilibrium prediction; with price information feedback, on the other hand, subjects overbid the risk neutral Nash equilibrium significantly. The constant relative risk aversion model is rejected since it predicts overbidding for both feedback conditions.

Keywords: Experimental Economics; First-price Sealed-bid Auctions; Independent Private Value Model; Bidding Theory; Risk Aversion (search for similar items in EconPapers)
JEL-codes: C92 C12 C13 C72 D44 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-exp
Date: 2005-03-25
Note: Type of Document - pdf; pages: 25
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