Investment Incentives in Auctions: An Experiment

Veronika Grimm (), Friederike Mengel, Giovanni Ponti () and Lari Viianto ()

No 26, Working Paper Series in Economics from University of Cologne, Department of Economics

Abstract: We experimentally analyze first and second price auctions where one bidder can achieve a comparative advantage by investment prior to the auction. We find that, as predicted by theory, bidders invest more often prior to second price auctions than prior to first price auctions. In both auction formats bidding is more aggressive than the equilibrium prediction. However, bidding is closer to equilibrium than in control treatments where the comparative advantage is exogenous.

Keywords: Auctions; Investment Incentives; Asymmetric Auctions; Experimental Economics (search for similar items in EconPapers)
JEL-codes: C91 D44 (search for similar items in EconPapers)
Date: 2006-06-06
New Economics Papers: this item is included in nep-com and nep-exp
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