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Impulse Balance Equilibrium and Feedback in First Price Auctions

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Author Info
Axel Ockenfels
Reinhard Selten

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Abstract

Experimental sealed-bid first-price auctions with private values in which feedback on the losing bids is provided yield lower revenues than auctions where this feedback is not given. The concept of weighted impulse balance equilibrium, which is based on a principle of ex post rationality and incorporates a concern for social comparison, captures the data.

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File URL: http://ockenfels.uni-koeln.de/RePEc/download/wp0007.pdf
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Publisher Info
Paper provided by University of Cologne, Department of Economics in its series Working Paper Series in Economics with number 7.

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Length: 21 pages
Date of creation: 08 Apr 2004
Date of revision:
Publication status: Forthcoming Games and Economic Behavior
Handle: RePEc:kls:series:0007

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Related research
Keywords: Auctions; Overbidding; Feedback; Experiments; Ex-post rationality; Bounded rationality; Social comparison;

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Find related papers by JEL classification:
C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
C9 - Mathematical and Quantitative Methods - - Design of Experiments

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References listed on IDEAS
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. Huck, Steffen & Normann, Hans-Theo & Oechssler, Jorg, 2000. "Does information about competitors' actions increase or decrease competition in experimental oligopoly markets?," International Journal of Industrial Organization, Elsevier, vol. 18(1), pages 39-57, January. [Downloadable!] (restricted)
    Other versions:
  2. Paul R. Milgrom, 1985. "Auction Theory," Cowles Foundation Discussion Papers 779, Cowles Foundation, Yale University. [Downloadable!]
  3. Timothy N. Cason & Daniel Friedman, 1997. "Price Formation in Single Call Markets," Econometrica, Econometric Society, vol. 65(2), pages 311-346, March.
  4. Ockenfels, Axel & Roth, Alvin E., 2006. "Late and multiple bidding in second price Internet auctions: Theory and evidence concerning different rules for ending an auction," Games and Economic Behavior, Elsevier, vol. 55(2), pages 297-320, May. [Downloadable!] (restricted)
    Other versions:
  5. Isaac, R. Mark & Walker, James M., 1985. "Information and conspiracy in sealed bid auctions," Journal of Economic Behavior & Organization, Elsevier, vol. 6(2), pages 139-159, June. [Downloadable!] (restricted)
  6. Colin Camerer & Teck-Hua Ho, 1999. "Experience-weighted Attraction Learning in Normal Form Games," Econometrica, Econometric Society, vol. 67(4), pages 827-874, July.
  7. Cox, James C & Smith, Vernon L & Walker, James M, 1988. " Theory and Individual Behavior of First-Price Auctions," Journal of Risk and Uncertainty, Springer, vol. 1(1), pages 61-99, March.
  8. Dan Ariely & Axel Ockenfels & Alvin E. Roth, 2002. "An Experimental Analysis of Ending Rules in Internet Auctions," Papers on Strategic Interaction 2002-47, Max Planck Institute of Economics, Strategic Interaction Group. [Downloadable!]
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  9. Gary E. Bolton & Axel Ockenfels, 2000. "ERC: A Theory of Equity, Reciprocity, and Competition," American Economic Review, American Economic Association, vol. 90(1), pages 166-193, March. [Downloadable!] (restricted)
  10. Reinhard Selten & Klaus Abbink & Ricarda Cox, 2005. "Learning Direction Theory and the Winner’s Curse," Experimental Economics, Springer, vol. 8(1), pages 5-20, April. [Downloadable!] (restricted)
  11. repec:bep:eapcon:v:2:y:2003:i:1:p:1102-1102 is not listed on IDEAS
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  12. Ernst Fehr & Klaus M. Schmidt, 1999. "A Theory Of Fairness, Competition, And Cooperation," The Quarterly Journal of Economics, MIT Press, vol. 114(3), pages 817-868, August. [Downloadable!] (restricted)
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  13. Dufwenberg, Martin & Gneezy, Uri, 2002. "Information disclosure in auctions: an experiment," Journal of Economic Behavior & Organization, Elsevier, vol. 48(4), pages 431-444, August. [Downloadable!] (restricted)
  14. Alvin E. Roth & Axel Ockenfels, 2002. "Last-Minute Bidding and the Rules for Ending Second-Price Auctions: Evidence from eBay and Amazon Auctions on the Internet," American Economic Review, American Economic Association, vol. 92(4), pages 1093-1103, September. [Downloadable!]
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  15. Crawford, Vincent P, 1995. "Adaptive Dynamics in Coordination Games," Econometrica, Econometric Society, vol. 63(1), pages 103-43, January. [Downloadable!] (restricted)
    Other versions:
  16. Selten, Reinhard & Joachim Buchta, 1994. "Experimental Sealed Bid First Price Auctions with Directly Observed Bid Functions," Discussion Paper Serie B 270, University of Bonn, Germany.
  17. Timothy Cason & Daniel Friedman, 1999. "Learning in a Laboratory Market with Random Supply and Demand," Experimental Economics, Springer, vol. 2(1), pages 77-98, August. [Downloadable!] (restricted)
  18. Kagel, J.H. & Levin, D., 1988. "Independent Private Value Auctions: Bidder Behavior In First, Second And Third-Price Auctions With Varying Numbers Of Bidders," Papers 13, Houston - Department of Economics.
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  19. Harrison, Glenn W, 1989. "Theory and Misbehavior of First-Price Auctions," American Economic Review, American Economic Association, vol. 79(4), pages 749-62, September. [Downloadable!] (restricted)
  20. Cox, James C & Smith, Vernon L & Walker, James M, 1984. " Theory and Behavior of Multiple Unit Discriminative Auctions," Journal of Finance, American Finance Association, vol. 39(4), pages 983-1010, September. [Downloadable!] (restricted)
  21. Selten, Reinhard, 1998. "Features of experimentally observed bounded rationality," European Economic Review, Elsevier, vol. 42(3-5), pages 413-436, May. [Downloadable!] (restricted)
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  22. Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer, vol. 10(2), pages 171-178, June. [Downloadable!] (restricted)
Full references

Cited by:
(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. Olivier Armantier & Nicolas Treich, 2006. "Overbidding in Independant Private-Values Auctions and Misperception of Probabilities," CIRANO Working Papers 2006s-15, CIRANO. [Downloadable!]
  2. Alan Mehlenbacher, 2007. "Multiagent System Platform for Auction Simulations," Department Discussion Papers 0706, Department of Economics, University of Victoria. [Downloadable!]
  3. Emel Filiz & Erkut Y. Ozbay, 2005. "Auctions with Anticipated Regret," Experimental 0511006, EconWPA. [Downloadable!]
  4. Richard Engelbrecht-Wiggans & Elena Katok, 2007. "Regret in auctions: theory and evidence," Economic Theory, Springer, vol. 33(1), pages 81-101, October. [Downloadable!] (restricted)
  5. Tibor Neugebauer & Javier Perote, 2005. "Theory And Misbehavior Of First-Price Auctions: The Importance Of Information Feedback In Experimental Markets," Experimental 0503008, EconWPA. [Downloadable!]
  6. Doron Sonsino & Radosveta Ivanova-Stenzel, 2006. "Experimental internet auctions with random information retrieval," Experimental Economics, Springer, vol. 9(4), pages 323-341, December. [Downloadable!] (restricted)
  7. Amegashie, J.A. & Cadsby, C.B. & Song, Y., 2005. "Competitive Burnout: Theory and Experimental Evidence," Working Papers 2005-7, University of Guelph, Department of Economics. [Downloadable!]
    Other versions:
  8. Reinhard Selten & Thorsten Chmura, 2005. "Stationary Concepts for Experimental 2x2 Games," Bonn Econ Discussion Papers bgse33_2005, University of Bonn, Germany. [Downloadable!]
    Other versions:
  9. Bernd Irlenbusch & Gabriele K. Ruchala, 2006. "Relative Rewards within Team-Based Compensation," IZA Discussion Papers 2423, Institute for the Study of Labor (IZA). [Downloadable!]
  10. Spiliopoulos, Leonidas, 2009. "Neural networks as a learning paradigm for general normal form games," MPRA Paper 16765, University Library of Munich, Germany. [Downloadable!]
  11. Roberto Serrano & Rene Saran, 2007. "The Evolution Of Bidding Behavior In Private-Values Auctions And Double Auctions," Working Papers wp2007_0712, CEMFI. [Downloadable!]
    Other versions:
  12. Alan Mehlenbacher, 2007. "Multiagent System Simulations of Sealed-Bid Auctions with Two-Dimensional Value Signals," Department Discussion Papers 0707, Department of Economics, University of Victoria. [Downloadable!]
  13. Oliver Kirchkamp, & Eva Poen, & Philipp Reiß, 2006. "Outside options: Another reason to choose the first-price auction," CRIEFF Discussion Papers 0605, Centre for Research into Industry, Enterprise, Finance and the Firm. [Downloadable!]
    Other versions:
  14. Tibor Neugebauer, 2007. "Bid and price effects of increased competition in the first-price auction: experimental evidence," Working Papers of CREFI-LSF (Centre of Research in Finance - Luxembourg School of Finance) 07-17, CREFI-LSF, University of Luxembourg. [Downloadable!]
  15. Alan Mehlenbacher, 2007. "Multiagent System Simulations of Signal Averaging in English Auctions with Two-Dimensional Value Signals," Department Discussion Papers 0708, Department of Economics, University of Victoria. [Downloadable!]
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