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GAMES
2016

Revenue Implications of Strategic and External Auction Risk

4 years 1 months ago
Revenue Implications of Strategic and External Auction Risk
Two experimental treatments are used to study the e↵ects of auction risk across five mechanisms. The first canonical, baseline treatment features only strategic risk and replicates the standard results that overbidding relative to the risk neutral Nash equilibrium is prevalent in all common auction mechanisms except for the English auction. We do not find evidence that bidders’ risk preferences can explain these patterns of overbidding. To enhance salience, we introduce a second novel treatment with external risk. This treatment captures the risk, prevalent in online auctions, that winners will not receive a good of value. We find that dynamic auctions – including the English – are particularly susceptible to overbidding in this environment. We conclude with a brief discussion of research implications. JEL Classification: H41, C92, D85
Andrea Robbett, Michael K. Graham, Peter Hans Matt
Added 03 Apr 2016
Updated 03 Apr 2016
Type Journal
Year 2016
Where GAMES
Authors Andrea Robbett, Michael K. Graham, Peter Hans Matthews
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