Theory and Individual Behavior of First-Price Auctions
James Cox (),
Vernon Smith and
Journal of Risk and Uncertainty, 1988, vol. 1, issue 1, 61-99
First-price auction theory is extended to the case of heterogeneous bidders characterized by M-parameter log-concave utility functions. This model, and its specific two-parameter constant relative risk averse special case, is generally supported by the results of 47 experiments. The one-parameter special case that comprises most of the theoretical literature is not supported by the experiments. One anomaly for the two-parameter model is that too many of the subjects exhibit positive (or negative) intercepts in their linear estimated bid functions. Accordingly, we develop a specific three-parameter model, which introduces a utility of winning, and a threshold utility of surplus. The new model, tested directly by introducing lump-sum payments or charges for winning, is not falsified by the new experiments. Copyright 1988 by Kluwer Academic Publishers
References: Add references at CitEc
Citations: View citations in EconPapers (191) Track citations by RSS feed
There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:kap:jrisku:v:1:y:1988:i:1:p:61-99
Ordering information: This journal article can be ordered from
http://www.springer. ... ry/journal/11166/PS2
Access Statistics for this article
Journal of Risk and Uncertainty is currently edited by W. Kip Viscusi
More articles in Journal of Risk and Uncertainty from Springer
Bibliographic data for series maintained by Sonal Shukla ().