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Does regret matter in first-price auctions?

Author

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  • Ratan, Anmol
  • Wen, Yuanji

Abstract

“Overbidding” with respect to risk-neutral Nash predictions in first-price auction experiments has been consistently reported in the literature. One possible explanation for overbidding is that participants in these experiments may try to avoid regret induced by the knowledge of winning bids in case they do not win these auctions. Such considerations may drive bidders to bid aggressively in first-price auctions. We test whether differences in how auction outcomes are revealed produces systematic differences in bidding. In our design, where individuals bid against pre-programmed computers, differences in revelation of winning bids, does not produce significant treatment differences. Our results are in contrast to previous experiments, which report systematic treatment differences based on whether winning bids are revealed or not.

Suggested Citation

  • Ratan, Anmol & Wen, Yuanji, 2016. "Does regret matter in first-price auctions?," Economics Letters, Elsevier, vol. 143(C), pages 114-117.
    • Handle: RePEc:eee:ecolet:v:143:y:2016:i:c:p:114-117
    DOI: 10.1016/j.econlet.2016.03.021
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    Citations

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    Cited by:

    1. Sascha Füllbrunn & Dirk‐Jan Janssen & Utz Weitzel, 2019. "Risk Aversion And Overbidding In First Price Sealed Bid Auctions: New Experimental Evidence," Economic Inquiry, Western Economic Association International, vol. 57(1), pages 631-647, January.
    2. García-Pola, Bernardo, 2020. "Do people minimize regret in strategic situations? A level-k comparison," Games and Economic Behavior, Elsevier, vol. 124(C), pages 82-104.
    3. Xiao, Haohan & Xu, Meng, 2022. "Modelling bidding behaviors in shared parking auctions considering anticipated regrets," Transportation Research Part A: Policy and Practice, Elsevier, vol. 161(C), pages 88-106.
    4. Paul Pezanis-Christou & Hang Wu, 2017. "A Naïve Approach to Bidding," School of Economics and Public Policy Working Papers 2017-03, University of Adelaide, School of Economics and Public Policy.
    5. Paul Pezanis-Christou & Hang Wu, 2018. "A non-game-theoretic approach to bidding in first-price and all-pay auctions," School of Economics and Public Policy Working Papers 2018-12, University of Adelaide, School of Economics and Public Policy.

    More about this item

    Keywords

    Overbidding; Auction; Anticipated regret; Ambiguity; Laboratory experiments;
    All these keywords.

    JEL classification:

    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
    • C9 - Mathematical and Quantitative Methods - - Design of Experiments
    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty

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