Robust Bidding in First-Price Auctions: How to Bid without Knowing What Others Are Doing

64 Pages Posted: 2 Oct 2017 Last revised: 6 Sep 2022

See all articles by Bernhard Kasberger

Bernhard Kasberger

Heinrich Heine University Dusseldorf - Duesseldorf Institute for Competition Economics (DICE)

Karl H. Schlag

University of Vienna - Department of Economics

Date Written: March 9, 2022

Abstract

We propose how to bid in first-price auctions when a bidder knows her value but not how others will bid. To do this, we introduce a methodology for how to make choices in strategic settings without assuming common knowledge or equilibrium behavior. Accordingly, first eliminate environments that are believed not to occur and then find a robust rule that performs well in the remaining environments. We test our bids using data from laboratory experiments and the field. We find that our bids outperform those made by real bidders.

Keywords: robust decision-making, first-price auction, minimax loss, empirical loss, non-equilibrium model

JEL Classification: D44, D81, C57

Suggested Citation

Kasberger, Bernhard and Schlag, Karl H., Robust Bidding in First-Price Auctions: How to Bid without Knowing What Others Are Doing (March 9, 2022). Available at SSRN: https://ssrn.com/abstract=3044438 or http://dx.doi.org/10.2139/ssrn.3044438

Bernhard Kasberger (Contact Author)

Heinrich Heine University Dusseldorf - Duesseldorf Institute for Competition Economics (DICE) ( email )

Universitaetsstr. 1
Duesseldorf, NRW 40225
Germany

Karl H. Schlag

University of Vienna - Department of Economics ( email )

Oskar-Morgenstern-Platz 1
Vienna, A-1090
Austria

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