A pure variation of risk in first-price and second-price auctions
نویسندگان
چکیده
We introduce a new method of varying risk that bidders face in first-price and second-price private value auctions. We find that decreasing bidders’ risk in first-price auction reduces the degree of overbidding relative to the risk-neutral Bayesian-Nash equilibrium prediction. This finding is consistent with the risk-aversion explanation of overbidding. Furthermore, we apply the method to second-price auctions and find that bidding behavior is robust to manipulating bidders’ risk as generally expected in auction theory.
منابع مشابه
A pure variation of risk in private-value auctions
We introduce a new method of varying risk that bidders face in first-price and second-price private value auctions. We find that decreasing bidders’ risk in first-price auction reduces the degree of overbidding relative to the risk-neutral Bayesian Nash equilibrium prediction. This finding is consistent with the risk-aversion explanation of overbidding. Furthermore, we apply the method to secon...
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