An experimental test of precautionary bidding
Auctions often involve goods exhibiting a common knowledge ex-post risk that is independent of buyers' private values or their signals regarding common value components. Esö and White (2004) showed theoretically that ex-post risk leads to precautionary bidding for DARA bidders: Agents reduce t...
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| Main Authors: | , , |
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| Format: | Book/Monograph Working Paper |
| Language: | English |
| Published: |
München
Univ., Volkswirtschaftliche Fak.
2010
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| Series: | Münchener Wirtschaftswissenschaftliche Beiträge
2010-30 |
| In: |
Münchener Wirtschaftswissenschaftliche Beiträge (2010-30)
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| Subjects: | |
| Online Access: | Resolving-System, Volltext: http://nbn-resolving.de/urn:nbn:de:bvb:19-epub-11743-5 Verlag, Volltext: http://epub.ub.uni-mueanchen.de/11743/1/Kocher_Pahlke_Trautmann_2010.pdf Resolving-System, Volltext: http://hdl.handle.net/10419/104329 
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| Author Notes: | Martin G. Kocher; Julius Pahlke; Stefan T. Trautmann |
| Summary: | Auctions often involve goods exhibiting a common knowledge ex-post risk that is independent of buyers' private values or their signals regarding common value components. Esö and White (2004) showed theoretically that ex-post risk leads to precautionary bidding for DARA bidders: Agents reduce their bids by more than their appropriate risk premium. Testing precautionary bidding with data from the field seems almost impossible. We conduct experimental first-price auctions that allow us to directly identify the precautionary premium and find clear evidence for precautionary bidding. Bidders are significantly better off when a risky object rather than an equally valued sure object is auctioned. Our results are robust if we control for potentially confounding decision biases. |
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| Physical Description: | Online Resource |
| Format: | Systemvoraussetzungen: Acrobat Reader. |