Economics at your fingertips  

The overbidding-myth and the underbidding-bias in first-price auctions

Oliver Kirchkamp () and J. Philipp Reiss

No 04-32, Papers from Sonderforschungsbreich 504

Abstract: First-price auction experiments find often substantial overbidding which is typically related to risk aversion. We introduce a model where some bidders use simple linear bids. As with risk aversion this leads to overbidding if valuations are high, but in contrast to risk aversion the model predicts underbidding if valuations are low. We test this model with the help of experiments, compare bidding in first-price and second-price auctions and study revenue under different treatments. We conclude that at least part of the commonly observed overbidding is an artefact of experimental setups which rule out underbidding. Simple linear bids seem to fit observations better.

Keywords: Auction; Experiment; Overbidding; Underbidding; Risk-Aversion (search for similar items in EconPapers)
JEL-codes: D44 C92 (search for similar items in EconPapers)
Date: 2004
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed

Downloads: (external link)

Related works:
Working Paper: The overbidding-myth and the underbidding-bias in first-price auctions (2004) Downloads
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:

Access Statistics for this paper

More papers in Papers from Sonderforschungsbreich 504 Contact information at EDIRC.
Bibliographic data for series maintained by Katharina Rautenberg ().

Page updated 2020-10-27
Handle: RePEc:mnh:spaper:2710