Cluster Detection in Laboratory Auction Data: A Model-Based Approach

Andrés Romeu ()

Panoeconomicus, 2011, vol. 58, issue 4, 473-488

Abstract: The benchmark risk-averse equilibrium model does not explain some of the outcomes obtained in experiments with first-price auctions. Nonetheless, the presence of non-linear bidding and the wide dispersion of bids have received little attention in the literature. I focus on these issues and revisit previous laboratory evidence with the help of model-based clustering techniques. The rejection of equilibrium models is found to be mostly due to the significance of non-linear bidding rules and the unexplained heterogeneity. With the use of a mixture model, the observations are classified into four groups or clusters. Significant differences between individuals and clusters are found, but so is a persistent within individual variation, which leads us to conclude that subjects do not commit to one particular bidding strategy and alternate across several processes. Key words: Clustering, Experimental Auctions, Non-linear bidding.JEL: C91, D44, D03.

Keywords: Clustering; Experimental Auctions; Non-linear bidding (search for similar items in EconPapers)
Date: 2011
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