Regret in auctions Theory and evidence

The sealed-bid first-price auction of a single object in the case of independent privately-known values is the simplest auction setting and understanding it is important for understanding more complex mechanisms. But bidders bid above the risk-neutral Nash equilibrium theory prediction. The reasons...

Full description

Saved in:
Bibliographic Details
Published inEconomic theory Vol. 33; no. 1; pp. 81 - 101
Main Authors Engelbrecht-Wiggans, Richard, Katok, Elena
Format Journal Article
LanguageEnglish
Published Heidelberg Springer 01.10.2007
Springer Nature B.V
Subjects
Auction theory
Auctions
Auktion
Behavior
Behavioural economics
Bidding
Bids
Competition
Design
Economic behaviour
Economic models
Equilibrium
Expected utility
Experiment
Experimental economics
Experiments
Game theory
Games of strategy
Hypotheses
Information feedback
Laboratories
Learning
Learning theory
Lernen
Lotteries
Modeling
Regret
Risiko
Risk
Risk aversion
Studies
SYMPOSIUM
Transportation services
Utility functions
Wirtschaftstheorie
Online AccessGet full text

Cover

More Information
Summary:The sealed-bid first-price auction of a single object in the case of independent privately-known values is the simplest auction setting and understanding it is important for understanding more complex mechanisms. But bidders bid above the risk-neutral Nash equilibrium theory prediction. The reasons for this "over bidding" remain an unsolved puzzle. Several explanations have been offered, including risk aversion, social comparisons, and learning. We present a new explanation based on regret and a model that explains not only the observed over bidding in sealed-bid first-price auctions, but also behavior in several other settings that is inconsistent with risk aversion.
Bibliography:ObjectType-Article-2
SourceType-Scholarly Journals-1
ObjectType-Feature-1
content type line 23
ISSN:0938-2259
1432-0479
1432-0479
DOI:10.1007/s00199-006-0180-9