Sealed Bid Auctions with Ambiguity: Theory and Experiments
44 Pages Posted: 22 Jun 2008 Last revised: 22 Dec 2012
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: Suggested Citation
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