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Heterogeneous bids in auctions with rational and boundedly rational bidders: theory and experiment

  • Oliver Kirchkamp
  • J. Philipp ReißEmail author
Original Paper
  • 35 Downloads

Abstract

We present results from a series of experiments that allow us to measure overbidding and, in particular, underbidding in first-price auctions. We investigate the extent to which the amount of underbidding depends on the seemingly innocuous parameters of the experimental setup. To structure our data, we present and test a theory that introduces constant markdown bidders into a population of fully rational bidders. While a fraction of bidders in the experiment can be described by Bayesian Nash equilibrium bids, a larger fraction seems either to use constant markdown bids or to rationally optimise against a population with fully rational and boundedly rational markdown bidders.

Keywords

Experiments Auction Bounded rationality Overbidding Underbidding Markdown bidding 

JEL Classification

C92 D44 

Notes

Supplementary material

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Copyright information

© Springer-Verlag GmbH Germany, part of Springer Nature 2019

Authors and Affiliations

  1. 1.School of EconomicsUniversität JenaJenaGermany
  2. 2.Institute of EconomicsKarlsruhe Institute of Technology (KIT)KarlsruheGermany

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