A non-game-theoretic approach to bidding in first-price and all-pay auctions
Paul Pezanis-Christou () and
Hang Wu ()
No 2018-12, School of Economics Working Papers from University of Adelaide, School of Economics
We propose a novel approach to the modelling of behavior in first-price and all-pay auctions that builds on the presumption that bidders do not engage in game-theoretic reasoning. Our models, AsP (for Aspired-Payoff) and nIBE (for naÃ¯ve Impulse Balance Equilibrium), exploit the information available to bidders and assume risk neutrality, no best-responding behavior and no profit-maximization. Their parameter-free variants entail either overbidding or Nash equilibrium bidding. We assess their explanatory power with the data of first-price and all-pay auction experiments and find that overall, our models outperform Nash in explaining the data on either format. Assuming probability misperception further improves their goodness-of-fit. Assuming impulse weighting in nIBE may lead to overbidding and organizes the effect of end-of-round information feedback on behavior in repeated auctions.
Keywords: first-price auctions; all-pay auctions, overbidding, anticipated regret; information-feedback; Symmetric Bayes-Nash Equilibrium; Impulse Balance Equilibrium; nonlinear probability weighting; revenue equivalence; experiments (search for similar items in EconPapers)
JEL-codes: C91 D03 D4 D44 D81 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-des, nep-exp and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2) Track citations by RSS feed
Downloads: (external link)
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:adl:wpaper:2018-12
Access Statistics for this paper
More papers in School of Economics Working Papers from University of Adelaide, School of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Nicolas Groshenny ().