Heterogeneous bids in auctions with rational and boundedly rational bidders: theory and experiment

Oliver Kirchkamp and J. Philipp Reiß ()
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J. Philipp Reiß: Karlsruhe Institute of Technology (KIT)

International Journal of Game Theory, 2019, vol. 48, issue 4, No 1, 1031 pages

Abstract: Abstract We present results from a series of experiments that allow us to measure overbidding and, in particular, underbidding in first-price auctions. We investigate the extent to which the amount of underbidding depends on the seemingly innocuous parameters of the experimental setup. To structure our data, we present and test a theory that introduces constant markdown bidders into a population of fully rational bidders. While a fraction of bidders in the experiment can be described by Bayesian Nash equilibrium bids, a larger fraction seems either to use constant markdown bids or to rationally optimise against a population with fully rational and boundedly rational markdown bidders.

Keywords: Experiments; Auction; Bounded rationality; Overbidding; Underbidding; Markdown bidding (search for similar items in EconPapers)
JEL-codes: C92 D44 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (3)

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DOI: 10.1007/s00182-019-00678-0

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