Hostname: page-component-5ffc9858b4-r8244 Total loading time: 0 Render date: 2025-03-24T05:58:15.506Z Has data issue: false hasContentIssue false
  • English
  • Français

Bidding ‘as if’ risk neutral in experimental first price auctions without information feedback

Published online by Cambridge University Press:  14 March 2025

Tibor Neugebauer  and
Javier Perote
Tibor Neugebauer*
Affiliation:
Institut für Finanzmarkttheorie, Universität Hannover, Königsworther Platz 1, 30167 Hannover, Germany
Javier Perote
Affiliation:
Dpto. de Economía Aplicada II y Fundamentos del Análisis Económico, Universidad Rey Juan Carlos, Campus de Vicálvaro, 28032 Madrid, Spain
*
e-mail: [email protected]
Get access Rights & Permissions [Opens in a new window]

Abstract

Experimental research on first price sealed bid auctions has usually involved repeated settings with information feedback on winning bids and payoffs after each auction round. Relative to the risk neutral Nash equilibrium, significantly higher bidding has been reported. The present paper reports the results of experimental first price auctions with n = 7 where feedback on payoffs and winning bids is withheld. Under these conditions, average bidding is below the risk neutral Nash equilibrium prediction but converges to it with repetition.

Keywords

Experimental economicsFirst-price sealed-bid auctionsIndependent private value modelBidding theoryRisk aversionLearning

JEL classification

C13: Estimation: General C12: Hypothesis Testing: General D44: Auctions C92: Laboratory, Group Behavior C72: Noncooperative Games
Type
Research Article
Information
Experimental Economics , Volume 11 , Issue 2 , June 2008 , pp. 190 - 202
Copyright
Copyright © 2007 Economic Science Association

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Footnotes

Electronic supplementary material The online version of this article (http://dx.doi.org/10.1007/s10683-007-9166-0) contains supplementary material, which is available to authorized users.

References

Armantier, O., & Treich, N. (2005). Overbidding in independent private-values auctions and misperception of probabilities. Université Montréal, mimeo.Google Scholar
Cason, T. N. (1995). An experimental investigation of the seller incentives in the EPA's emission trading auction. American Economic Review, 85, 905–922.Google Scholar
Chen, K., & Plott, C. R. (1998). Nonlinear behavior in sealed-bid first-price auctions. Games and Economic Behavior, 25, 34–78.CrossRefGoogle Scholar
Cox, J. C., Roberson, B., & Smith, V. L. (1982). Theory and behavior of single object auctions. In Smith, V. L. (Ed.), Research in experimental economics (Vol. 2). Greenwich: Jai.Google Scholar
Cox, J. C., Smith, V. L., & Walker, J. M. (1987). Bidding behavior in first-price sealed-bid auctions: use of computerized nash competitors. Economics Letters, 23, 239–244.Google Scholar
Cox, J. C., Smith, V. L., & Walker, J. M. (1992). Theory and misbehavior of first-price auctions: comment. American Economic Review, 82, 1392–1412.Google Scholar
Dorsey, R. E., & Razzolini, L. (2003). Explaining overbidding in first price auctions using controlled lotteries. Experimental Economics, 6, 123–140.CrossRefGoogle Scholar
Dufwenberg, M., & Gneezy, U. (2002). Information disclosure in auctions: an experiment. Journal of Economic Behavior and Organization, 48, 431–444.CrossRefGoogle Scholar
Dyer, D., Kagel, J. H., & Levin, D. (1989). A comparison of naive and experienced bidders in common value offer auctions: a laboratory analysis. Rand Journal of Economics, 20, 268–279.CrossRefGoogle Scholar
Engelbrecht-Wiggans, R., & Katok, E. (2005a). Regret and feedback information in first-price sealed-bid auctions. Penn State University, working paper.CrossRefGoogle Scholar
Engelbrecht-Wiggans, R., & Katok, E. (2005b). Regret in auctions: theory and evidence. Penn State University, working paper.CrossRefGoogle Scholar
Fischbacher, U. (in press). z-Tree - Zurich Toolbox for Readymade Economic Experiments. Experimental Economics.Google Scholar
Friedman, D. (1992). Theory and misbehavior of first-price auctions: comment. American Economic Review, 82, 1374–1378.Google Scholar
Goeree, J. K., Holt, C. A., & Palfrey, T. R. (2002). Quantal response equilibrium and overbidding in private value auctions. Journal of Economic Theory, 104, 247–272.CrossRefGoogle Scholar
Harrison, G. W. (1989). Theory and misbehavior of first-price auctions. American Economic Review, 79, 749–762.Google Scholar
Harrison, G. W. (1992). Theory and misbehavior of first-price auctions: reply. American Economic Review, 82, 1426–1443.Google Scholar
Isaac, R. M., & Walker, J. M. (1985). Information and conspiracy in sealed-bid auctions. Journal of Economic Behavior and Organization, 6, 139–59.CrossRefGoogle Scholar
Kagel, J. H. (1995). Auctions: a survey of experimental research. In Kagel, J. H. & Roth, A. E. (Eds.), Handbook of experimental economics. Princeton: Princeton University Press.CrossRefGoogle Scholar
Kagel, J. H., Harstad, R., & Levin, D. (1987). Information impact and allocation rules in auctions with affiliated private values: a laboratory study. Econometrica, 55, 1275–1304.CrossRefGoogle Scholar
Kagel, J. H., & Levin, D. (1993). Independent private value auctions: bidder behavior in first-, second-, and third-price auctions with varying numbers of bidders. Economic Journal, 103, 868–879.CrossRefGoogle Scholar
Kagel, J. H., & Roth, A. E. (1992). Theory and misbehavior of first-price auctions: comment. American Economic Review, 82, 1379–1391.Google Scholar
Merlo, A., & Schotter, A. (1992). Theory and misbehavior of first-price auctions: comment. American Economic Review, 82, 1413–1425.Google Scholar
Neugebauer, T. (2004). Bidding strategies of sequential first price auctions programmed by experienced bidders. Cuadernos de Economía, 75(3), 153–184.Google Scholar
Neugebauer, T., & Selten, R. (2006). Individual behavior of first-price sealed-bid auctions: the importance of information feedback in experimental markets. Games and Economic Behavior, 54, 183–204.CrossRefGoogle Scholar
Ockenfels, A., & Selten, R. (2005). Impulse balance theory and feedback in first price auctions. Games and Economic Behavior, 51, 155–170.CrossRefGoogle Scholar
Ozbay, E. Y, & Filiz, E. (in press). Auctions with anticipated regret: theory and experiment. The American Economic Review.Google Scholar
Selten, R. (2004). Learning direction theory and impulse balance equilibrium. In Friedman, D. & Cassar, A. (Eds.), Economics lab - an intensive course in experimental economics (pp. 133–140). NY: Routledge.Google Scholar
Selten, R., & Buchta, J. (1999). Experimental sealed-bid first-price auctions with directly observed bid functions. In Budescu, D., Erev, I., Zwick, R. (Eds.), Games and human behavior: essays in the honor of Amnon Rapoport. NJ: Lawrenz Associates Mahwah.Google Scholar
Selten, R., Abbink, K., & Cox, R. (2005). Learning direction theory and the winner's curse. Experimental Economics, 8(1), 5–20.CrossRefGoogle Scholar
Vickrey, W. (1961). Counter-speculation, auctions, and competitive sealed tenders. Journal of Finance, 16, 8–37.CrossRefGoogle Scholar
Weber, R. A. (2003). ‘Learning’ without feedback in a competitive guessing game. Games and Economic Behavior, 44, 134–144.CrossRefGoogle Scholar
Supplementary material: File

Neugebauer and Perote supplementary material

Neugebauer and Perote supplementary material
Download Neugebauer and Perote supplementary material(File)
File 148 KB