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On the impact of low-balling: Experimental results in asymmetric auctions

AuthorsPezanis-Christou, Paul
Issue Date2002
CitationInternational Journal of Game Theory 31(1): 69-89 (2002)
AbstractThe paper reports on a series of asymmetric auction experiments with private-independent values and two buyers. Maskin and Riley (2000) showed, under some conditions, that if one buyer has a greater probability than the other of not being able to bid, first-price auctions could yield lower revenues to the seller than second-price auctions. The data rejected this prediction because of an important overbidding when subjects received low values in first- price auctions. In this asymmetric setting, the observed overbidding cannot be explained by the usual risk aversion hypothesis and the detection of a learning pattern indicates that subjects used more an adaptive behaviour than a static one. An ad hoc bidding strategy for the buyers who are the most likely to bid explains the observed low bids better than the risk neutral equilibrium strategy. Finally, as subjects appear to have bid in equilibrium as if there were two other competitors instead of only one, their bidding behaviour can be thought to have displayed an over anxiousness about winning.
Identifiersdoi: 10.1007/s001820200108
issn: 0020-7276
e-issn: 1432-1270
Appears in Collections:(IAE) Artículos
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