Multi-dimensional reference-dependent preferences in sealed-bid auctions – How (most) laboratory experiments differ from the field

• Published in: Games and economic behavior Vol. 68; no. 2; pp. 634 - 645
• Main Authors: Lange, Andreas, Ratan, Anmol
• Format: Journal Article
• Language: English
• Published: Duluth Elsevier Inc 01.03.2010; Elsevier; Academic Press
• Series: Games and Economic Behavior
• Subjects: Auction; Auction Loss aversion Reference dependence Revenue equivalence Laboratory experiments Induced value Field data; Auctions; Bidding; Bids; Comparative analysis; Economic models; Experiments; Field data; Induced value; Laboratories; Laboratory; Laboratory experiments; Loss; Loss aversion; Preferences; Reference dependence; Revenue equivalence; Risk aversion; Strategic behaviour; Studies; Reference dependence; Induced value; Field data; D44; Auction; C91; Revenue equivalence; C93; Laboratory experiments; Loss aversion

We study bidding behavior in first- and second-price sealed-bid auctions with loss-averse agents. Our model predicts overbidding in first-price induced-value auctions consistent with evidence from most laboratory experiments. Substantially different bidding behavior could result in commodity auction...