Preferences and decision support in competitive bidding

Nicolas Fugger, Philippe Gillen, Alexander Rasch and Christopher Zeppenfeld

No 17-057, ZEW Discussion Papers from ZEW - Leibniz Centre for European Economic Research

Abstract: We examine bidding behavior in first-price sealed-bid and Dutch auctions, which are strategically equivalent under standard preferences. We investigate whether the empirical breakdown of this equivalence is due to (non-standard) preferences or due to the different complexity of the two formats (i.e., a different level of mathematical/ individual sophistication needed to derive the optimal bidding strategy). We first elicit measures of individual preferences and then manipulate the degree of complexity by offering various levels of decision support. Our results show that the equivalence of the two auction formats only breaks down in the absence of decision support. This indicates that the empirical breakdown is caused by differing complexity between the two formats rather than non-standard preferences.

Keywords: Auctions; Decision support system; Experiment; Loss aversion; Preferences (search for similar items in EconPapers)
JEL-codes: D44 D81 (search for similar items in EconPapers)
Date: 2017
New Economics Papers: this item is included in nep-des, nep-exp, nep-gth, nep-mic and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Working Paper: Preferences and Decision Support in Competitive Bidding (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:zewdip:17057

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