Spite and reciprocity in auctions (Q2344987)
From MaRDI portal
scientific article
Language | Label | Description | Also known as |
---|---|---|---|
English | Spite and reciprocity in auctions |
scientific article |
Statements
Spite and reciprocity in auctions (English)
0 references
19 May 2015
0 references
Summary: The paper presents a complete information model of bidding in second price sealed-bid and ascending-bid (English) auctions, in which potential buyers know the unit valuation of other bidders and may spitefully prefer that their rivals earn a lower surplus. Bidders with spiteful preferences should overbid in equilibrium when they know their rival has a higher value than their own, and bidders with a higher value underbid to reciprocate the spiteful overbidding of the lower value bidders. The model also predicts different bidding behavior in second price as compared to ascending-bid auctions. The paper also presents experimental evidence broadly consistent with the model. In the complete information environment, lower value bidders overbid more than higher value bidders, and they overbid more frequently in the second price auction than in the ascending price auction. Overall, the lower value bidder submits bids that exceed value about half the time. These patterns are not found in the incomplete information environment, consistent with the model.
0 references
ascending-bid auction
0 references
second price auction
0 references
experiment
0 references
dominant strategy
0 references
social preferences
0 references
spite
0 references
reciprocity
0 references
English auction
0 references