The Evolution of Bidding Behavior in Private-Values Auctions and Double Auctions∗
نویسندگان
چکیده
In environments with “diffuse” uncertainty, we study bidding behavior in auctions and double auctions. Our dynamics has a strong component of inertia but with a small probability, bids are modified in the direction of ex-post regrets. We apply stochastic stability to identify essentially a unique bid that will be used by each type in the long run. In the first-price auction, bidding half of one’s valuation is stable. The stable bid in the k-double auction is a toughening of the linear-equilibrium strategy. Adding a friction in changing one’s bid generates truth-telling behavior in both auctions. Stable bids minimize maximal regret.
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