Behavioral models for first-price sealed-bid auctions with the one-shot decision theory

Chao Wang and Peijun Guo

European Journal of Operational Research, 2017, vol. 261, issue 3, 994-1000

Abstract: We build an auction model with the one-shot decision theory which describes the process of a bidder deciding his/her bidding price in first-price sealed-bid auctions. The decision making procedure involves two steps: First, for each of his/her possible bidding prices, the bidder examines every possible highest bidding price provided by the other bidders and chooses one as a focus point of this bidding price of him/her. Then, the bidder determines such a bidding price as the optimal one that generates the best outcome when its focus point occurs. The optimal bidding price can be obtained and two common phenomena in auction markets: throwing away and overbidding are well explained.

Keywords: Decision support systems; Behavioral models; Auctions/bidding; One-shot decision theory; Throwing away/overbidding (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (13)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ejores:v:261:y:2017:i:3:p:994-1000

DOI: 10.1016/j.ejor.2017.03.024

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