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Sequential auctions with budget constraints: Evidence from fantasy basketball auction drafts

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  • Boudreau, James W.
  • Shunda, Nicholas

Abstract

We study bidding behavior in sequential auctions in a unique dataset drawn from a natural field experiment: fantasy basketball auction drafts. As auctions, they are novel in that they feature publicly “recommended” but non-binding bid prices and bidders with identical budget constraints. Recommended prices prove to be reasonable forecasts of player value and bidding on average tends to follow those recommendations. Individual bidding behavior, however, follows a distinct pattern of overbidding followed by underbidding (relative to recommended value). Participants tend to overbid early, paying more than the recommended value for the first two or three players they win, irrespective of who those players are. Underbidding for the next few picks then follows, with some overbidding occurring for the last pick. This behavior suggests a new variety of declining price phenomenon which we believe is reflective of the auction environment.

Suggested Citation

  • Boudreau, James W. & Shunda, Nicholas, 2016. "Sequential auctions with budget constraints: Evidence from fantasy basketball auction drafts," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 62(C), pages 8-22.
    • Handle: RePEc:eee:soceco:v:62:y:2016:i:c:p:8-22
    DOI: 10.1016/j.socec.2016.03.002
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    Cited by:

    1. Lawrence M. Ausubel & Justin E. Burkett & Emel Filiz-Ozbay, 2017. "An experiment on auctions with endogenous budget constraints," Experimental Economics, Springer;Economic Science Association, vol. 20(4), pages 973-1006, December.
    2. Ulrich Bergmann & Arkady Konovalov, 2024. "Auction design and order of sale with budget-constrained bidders," Experimental Economics, Springer;Economic Science Association, vol. 27(1), pages 36-57, March.

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    More about this item

    Keywords

    Sequential auctions; Budget constraints; Fantasy sports; Declining price anomaly; Overbidding; Underbidding;
    All these keywords.

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments

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