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Bidding behaviour in experimental auctions under risk and uncertainty

Author

Listed:
  • Chloe S. McCallum

    (Queen’s University Belfast
    Queen’s University Belfast
    ETH Zurich)

  • Simone Cerroni

    (University of Trento)

  • Daniel Derbyshire

    (Queen’s University Belfast
    University of Exeter)

  • W. George Hutchinson

    (Queen’s University Belfast)

  • Rodolfo M. Nayga

    (Texas A&M University
    Korea University)

Abstract

This paper explores bidding behaviour under risk and uncertainty using the Becker-DeGroot-Marschak mechanism (BDM) and second price auction (SPA). It investigates whether values elicited via the two mechanisms are consistent and whether bidding behaviour can be influenced by differences in the number and type of sources of risk and uncertainty that people face when exposed to the two mechanisms. In our experiment, subjects are exposed to non-monetary lotteries where they bid for a high-quality seafood product, but there is a chance (known or unknown) that they receive a lower quality seafood product instead. Results indicate that bidding behaviour can be influenced by the number and type of sources of risk and uncertainty that subjects face and subjects’ bidding behaviour is only consistent with standard theories of decision making under risk and uncertainty when they bid on a risky product in the SPA. Despite this, BDM and SPA elicit equal values under risk and uncertainty in this study.

Suggested Citation

  • Chloe S. McCallum & Simone Cerroni & Daniel Derbyshire & W. George Hutchinson & Rodolfo M. Nayga, 2025. "Bidding behaviour in experimental auctions under risk and uncertainty," Theory and Decision, Springer, vol. 98(3), pages 323-349, May.
    • Handle: RePEc:kap:theord:v:98:y:2025:i:3:d:10.1007_s11238-024-10005-z
    DOI: 10.1007/s11238-024-10005-z
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