Sealed Bid Auctions with Ambiguity: Theory and Experiments

44 Pages Posted: 22 Jun 2008 Last revised: 22 Dec 2012

See all articles by Yan Chen

Yan Chen

University of Michigan at Ann Arbor - Department of Economics

Peter Katuscak

RWTH Aachen University - Chair for Economics (Microeconomics)

Emre Ozdenoren

London Business School; Centre for Economic Policy Research (CEPR)

Date Written: February 4, 2007

Abstract

This study presents a laboratory experiment of the first and second price sealed bid auctions with independent private values, where the distribution of bidder valuations may be unknown. In our experimental setting, in the first price auction, bids are lower in the presence of ambiguity. This result is consistent with ambiguity loving in a model that allows for different ambiguity attitudes. We also find that the first price auction generates significantly higher revenue than the second price auction with and without ambiguity.

Keywords: sealed bid auctions, ambiguity, experiment

JEL Classification: C91, D44, D83

Suggested Citation

Chen, Yan and Katuscak, Peter and Ozdenoren, Emre, Sealed Bid Auctions with Ambiguity: Theory and Experiments (February 4, 2007). Journal of Economic Theory, Vol. 136, No. 1, 2007, Available at SSRN: https://ssrn.com/abstract=1148264 or http://dx.doi.org/10.2139/ssrn.1148264

Yan Chen (Contact Author)

University of Michigan at Ann Arbor - Department of Economics ( email )

611 Tappan Street
Ann Arbor, MI 48109-1220
United States

Peter Katuscak

RWTH Aachen University - Chair for Economics (Microeconomics) ( email )

Aachen, 52056
Germany

Emre Ozdenoren

London Business School ( email )

Sussex Place
Regent's Park
London, London NW1 4SA
United Kingdom

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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