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Robust Bidding in First-Price Auctions: How to Bid Without Knowing What Others Are Doing

Author

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  • Bernhard Kasberger

    (Düsseldorf Institute for Competition Economics, Heinrich Heine University Düsseldorf, Düsseldorf, 40225 North Rhine-Westphalia, Germany)

  • Karl H. Schlag

    (Department of Economics, University of Vienna, 1010 Vienna, Austria)

Abstract

We propose how to bid in first-price auctions when a bidder knows the own value but not how others will bid. To do this, we introduce a methodology to show how to make choices in strategic settings without assuming common knowledge or equilibrium behavior. Accordingly, we first eliminate environments that are believed not to occur and then find a robust rule that performs well in the remaining environments. We test our bids using data from laboratory experiments and the field and find that our bids outperform those made by real bidders.

Suggested Citation

  • Bernhard Kasberger & Karl H. Schlag, 2024. "Robust Bidding in First-Price Auctions: How to Bid Without Knowing What Others Are Doing," Management Science, INFORMS, vol. 70(7), pages 4219-4235, July.
    • Handle: RePEc:inm:ormnsc:v:70:y:2024:i:7:p:4219-4235
    DOI: 10.1287/mnsc.2023.4899
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    References listed on IDEAS

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    Cited by:

    1. Kasberger, Bernhard & Woodward, Kyle, 2021. "Bidding in Multi-Unit Auctions under Limited Information," MPRA Paper 111185, University Library of Munich, Germany.
    2. Mass, Helene, 2018. "Strategies under strategic uncertainty," ZEW Discussion Papers 18-055, ZEW - Leibniz Centre for European Economic Research.
    3. Schlag, Karl, 2018. "How to Play Out of Equilibrium: Beating the Average," VfS Annual Conference 2018 (Freiburg, Breisgau): Digital Economy 181525, Verein für Socialpolitik / German Economic Association.

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    More about this item

    Keywords

    robust decision making; first-price auction; minimax loss; empirical loss; nonequilibrium model;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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