An experimental study of a continuous Japanese-English auction for the wallet game

Konstantinos Georgalos (), Ricardo Gonçalves (), Indrajit Ray () and Sonali SenGupta ()
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Konstantinos Georgalos: Department of Economics, Lancaster University Management School
Ricardo Gonçalves: Católica Porto Business School, Universidade Católica Portuguesa
Indrajit Ray: Economics Section, Cardiff Business School, Cardiff University, https://www.cardiff.ac.uk/people/view/609610-ray-indrajit
Sonali SenGupta: Department of Economics, Queen’s Business School, Queen’s University Belfast

No E2025/25, Cardiff Economics Working Papers from Cardiff University, Cardiff Business School, Economics Section

Abstract: This paper reports results from a laboratory experiment on a continuous Japanese-English auction in a common-value ‘wallet game’. The main objective is to test whether bidders follow the equilibrium bidding strategy predicted by theory. We find systematic deviations from equilibrium behaviour: instead of bidding according to the Nash equilibrium, subjects appear to rely on expected value (EV) bidding. As a consequence, observed auction prices are higher than the theoretical benchmark, and the winner’s curse occurs in a substantial fraction of auctions. We analyse bidding behaviour in detail and discuss the implications of our findings

Keywords: Japanese-English auction (JEA); Wallet game; Continuous bids; Winner’s curse; Expected value bidding (search for similar items in EconPapers)
JEL-codes: C72 C91 C92 D63 D83 (search for similar items in EconPapers)
Pages: 23 pages
Date: 2025-12
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