A pure variation of risk in first-price auctions

Oliver Kirchkamp, J. Philipp Reiss and Abdolkarim Sadrieh

No 2008-024, Jena Economics Research Papers from Friedrich-Schiller-University Jena

Abstract: We introduce a new method of varying the risk that bidders face in first-price private value auctions. We find that decreasing bidders' risk significantly reduces the degree of overbidding relative to the risk-neutral Bayesian-Nash equilibrium prediction. This implies that risk a?ects bidding behavior as generally expected in auction theory. While resolving a long-standing debate on the e?ect of risk on auction behavior, our results give rise to a new puzzle. As risk is diminished and overbidding decreases for most of the value range, a significant degree of underbidding sets in for very low values.

Keywords: risk; fist-price auctions; risk-aversion; overbidding (search for similar items in EconPapers)
JEL-codes: C92 D44 (search for similar items in EconPapers)
Date: 2008-03-19
New Economics Papers: this item is included in nep-gth and nep-upt
References: Add references at CitEc
Citations: View citations in EconPapers (9)

Downloads: (external link)
https://oweb.b67.uni-jena.de/Papers/jerp2008/wp_2008_024.pdf (application/pdf)

Related works:
Working Paper: A pure variation of risk in first-price auctions (2006)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:jrp:jrpwrp:2008-024

Access Statistics for this paper

More papers in Jena Economics Research Papers from Friedrich-Schiller-University Jena
Bibliographic data for series maintained by Markus Pasche (markus.pasche@uni-jena.de).