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Understanding Overbidding In Second Price Auctions: An Experimental Study

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Author Info
DavidJ. Cooper
Hanming Fang

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Abstract

We present results from second price private value auction (SPA) experiments where bidders may receive noisy signals about their opponents' value. Such signals change bidders' perception about the 'strength' of their opponent, and the relationship between bidders' perception of their opponent and overbidding provides a novel channel to understand overbidding in SPA. We found that small and medium overbids are more likely to occur when bidders perceive their rivals to have similar values, supporting a modified 'joy of winning' hypothesis but large overbids are more likely to occur when bidders believe their opponents to have much higher values, consistent with the 'spite' hypothesis. Copyright © The Author(s). Journal compilation © Royal Economic Society 2008.

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File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1468-0297.2008.02181.x
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Publisher Info
Article provided by Royal Economic Society in its journal The Economic Journal.

Volume (Year): 118 (2008)
Issue (Month): 532 (October)
Pages: 1572-1595
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Handle: RePEc:ecj:econjl:v:118:y:2008:i:532:p:1572-1595

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  1. Andreoni, James & Che, Yeon-Koo & Kim, Jinwoo, 2007. "Asymmetric information about rivals' types in standard auctions: An experiment," Games and Economic Behavior, Elsevier, vol. 59(2), pages 240-259, May. [Downloadable!] (restricted)
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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Sujoy Chakravarty & Jaideep Roy, 2009. "Recursive expected utility and the separation of attitudes towards risk and ambiguity: an experimental study," Theory and Decision, Springer, vol. 66(3), pages 199-228, March. [Downloadable!] (restricted)
  2. James Andreoni & Yeon-Koo Che & Jinwoo Kim, 2006. "Asymmetric information about rivals' types in standard auctions: An experiment," Discussion Papers 0506-27, Columbia University, Department of Economics. [Downloadable!]
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  3. David Cooper, 2007. "An introduction to the symposium on behavioral game theory," Economic Theory, Springer, vol. 33(1), pages 1-10, October. [Downloadable!] (restricted)
  4. Kirchkamp, Oliver & Reiss, J. Philipp & Sadrieh, Abdolkarim, 2008. "A pure variation of risk in private-value auctions," Research Memoranda 050, Maastricht : METEOR, Maastricht Research School of Economics of Technology and Organization. [Downloadable!]
  5. Roider, Andreas & Schmitz, Patrick W., 2007. "Auctions with Anticipated Emotions: Overbidding, Underbidding, and Optimal Reserve Prices," CEPR Discussion Papers 6476, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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