In it to win it: Experimental evidence on unique bid auctions

Caroline Baethge, Marina Fiedler and Ernan Haruvey

No B-20-16, Passauer Diskussionspapiere, Betriebswirtschaftliche Reihe from University of Passau, Faculty of Business and Economics

Abstract: We examine bidding motives in discrete-point unique bid auctions in a laboratory setting. In lowest (highest) unique bid auctions, the participant with the lowest (highest) unique bid wins the auction. We posit two sets of motives in this type of auctions - a winning motive that is driven by the desire to win and a profit motive that is driven by the expected payoff. In the lowest unique bid auction (LUBA), the profit and winning motive lead to the same bidding strategy in equilibrium. In the highest unique bid auction (HUBA), the profit and winning motive lead to different bidding strategies in equilibrium. Using a utility-based choice framework, we identify and characterize the motives. Our findings suggest that bidders' behavior is driven by an array of motives. We find that not only does the winning motive play a key role in behavior, but other considerations such as reinforcement and coordination enter as well.

Keywords: unique bid auctions; bidding behavior; experiment; learning (search for similar items in EconPapers)
Date: 2016
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