Cross-Game Learning and Cognitive Ability in Auctions

Overbidding in second-price auctions (SPAs) has been shown to be persistent and associated with cognitive ability. We study experimentally what extent cross-game learning can reduce overbidding SPAs, taking into account skills. Employing an order-balanced design, we use first-price (FPAs) expose participants auction format which losses from high bids are more salient than SPAs. Experience FPAs causes substantial for cognitively less able but does not affect the able. Vice versa, experiencing SPAs before bidding FPA behavior by but, somewhat surprisingly, reduces bid shading participants, resulting lower profits FPAs. Thus, potential benefit bidders ability whereas it little or even adverse effects higher bidders.