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Heterogeneous bids in auctions with rational and markdown bidders - Theory and Experiment

Oliver Kirchkamp () and J. Philipp Reiss

No 2008-066, Jena Economic Research Papers from Friedrich-Schiller-University Jena

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 how the amount of underbidding depends on seemingly innocent parameters of the experimental setup. To structure our data we present and test a theory of constant markdown bids. While a fraction of bidders can be well described by Bayesian Nash equilibrium bids, a larger fraction seems to either use constant markdown bids or seems to rationally optimise against a population where some members use markdown bids and some are rational.

Keywords: Auction; Experiment; Overbidding; Underbidding; Risk-Aversion (search for similar items in EconPapers)
JEL-codes: C92 D44 (search for similar items in EconPapers)
Date: 2008-09-01
New Economics Papers: this item is included in nep-exp, nep-gth and nep-upt
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