The Dollar Auction Game: A laboratory comparison between Individuals and Groups

Andrea Morone, Simone Nuzzo and Rocco Caferra

MPRA Paper from University Library of Munich, Germany

Abstract: By means of a laboratory experiment, this paper aims at studying how individuals and groups behave in a simple game such as the dollar auction. This game is extremely interesting since it induces subjects to fall prey into the paradigm of escalation, which is driven by agents’ commitment to higher and higher bids. Indeed, whenever each participant commits himself to a bid, the lower bidder, moved by the wish to win as well as to defend his prior investment, finds it in his best interest to place a higher bid to overcome his opponent. The latter mechanism may lead subjects to overbid, implying that the winner pays more than the auctioned value. The aim of the paper is to analyze bidder’s behavior, comparing individuals vs. groups’ decisions within the dollar auction framework. We find that groups are closer than individuals to the Nash equilibrium, and that experience reduces the escalation phenomenon, but it has a different impact on winners and losers.

Keywords: escalation; winner’s curse (search for similar items in EconPapers)
JEL-codes: C91 (search for similar items in EconPapers)
Date: 2016-07-18
New Economics Papers: this item is included in nep-exp and nep-gth
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/72608/1/MPRA_paper_72608.pdf original version (application/pdf)

Related works:
Journal Article: The Dollar Auction Game: A Laboratory Comparison Between Individuals and Groups (2019)
Working Paper: The Dollar Auction Game: A laboratory comparison between Individuals and Groups (2017)
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:pra:mprapa:72608

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().