Sophisticated Bidders in Beauty-Contest Auctions

Stefano Galavotti (), Luigi Moretti and Paola Valbonesi

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Abstract: We study bidding behavior by firms in beauty-contest auctions, i.e. auctions in which the winning bid is the one which gets closest to some function (average) of all submitted bids. Using a dataset on public procurement beauty-contest auctions, we show that firms' observed bidding behavior departs from equilibrium and can be predicted by a sophistication index, which captures the firms' capacity of bidding close to optimality in the past. We show that our empirical evidence is consistent with a Cognitive Hierarchy model of bidders' behavior. We also investigate whether and how firms learn to bid strategically through experience.

Date: 2018-11
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Citations: View citations in EconPapers (5)

Published in American Economic Journal: Microeconomics, 2018, 10 (4), pp.1-26. ⟨10.1257/mic.20150240⟩

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Related works:
Journal Article: Sophisticated Bidders in Beauty-Contest Auctions (2018)
Working Paper: Sophisticated Bidders in Beauty-Contest Auctions (2018)
Working Paper: Sophisticated Bidders in Beauty-Contest Auctons (2017)
Working Paper: Sophisticated Bidders in Beauty-Contest Auctons (2017)
Working Paper: Sophisticated Bidders in Beauty-Contest Auctions (2017)
Working Paper: Sophisticated Bidders In Beauty-Contest Auctions (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-01619040

DOI: 10.1257/mic.20150240

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