Out‐Of‐Equilibrium Bids in First‐Price Auctions: Wrong Expectations or Wrong Bids

37 Pages Posted: 3 Dec 2011

See all articles by Oliver Kirchkamp

Oliver Kirchkamp

University of Jena - Economics Department; CESifo (Center for Economic Studies and Ifo Institute)

J. Philipp Reiß

affiliation not provided to SSRN

Date Written: December 2011

Abstract

Deviations from risk‐neutral equilibrium bids in auctions can be related to inconsistent expectations with correct best replies or correct expectations but deviant best replies (e.g. because of risk aversion, regret, quantal‐response mistakes). To distinguish between these two explanations, we use a novel experimental procedure and study expectations together with best replies in symmetric and asymmetric auctions. We extensively test the internal validity of this setup. We find that deviations from equilibrium bids do not seem to be because of to wrong expectations but because of deviations from a risk‐neutral best reply.

Suggested Citation

Kirchkamp, Oliver and Reiß, J. Philipp, Out‐Of‐Equilibrium Bids in First‐Price Auctions: Wrong Expectations or Wrong Bids (December 2011). The Economic Journal, Vol. 121, Issue 557, pp. 1361-1397, 2011. Available at SSRN: https://ssrn.com/abstract=1967351 or http://dx.doi.org/10.1111/j.1468-0297.2011.02455.x

Oliver Kirchkamp (Contact Author)

University of Jena - Economics Department ( email )

Carl-Zeiss-Str. 3
Jena, 07737
Germany

HOME PAGE: http://www.kirchkamp.de/

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.kirchkamp.de/

J. Philipp Reiß

affiliation not provided to SSRN

No Address Available

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