An experimental test of precautionary bidding

• Verfasst von: Kocher, Martin
• Verfasst von: Pahlke, Julius
• Verfasst von: Trautmann, Stefan T.
• Titel: An experimental test of precautionary bidding
• Verf.angabe: Martin G. Kocher; Julius Pahlke; Stefan T. Trautmann
• Verlagsort: München
• Verlag: Univ., Volkswirtschaftliche Fak.
• Jahr: 2010
• Umfang: Online-Ressource (33 S., 444 KB)
• Illustrationen: graph. Darst.
• Gesamttitel/Reihe: Münchener wirtschaftswissenschaftliche Beiträge ; 2010-30
• ComputerInfo: Systemvoraussetzungen: Acrobat Reader.
• URN: urn:nbn:de:bvb:19-epub-11743-5
• Datenträger: Online-Ressource
• Sprache: eng
• Sach-SW: precautionary bidding
• Sach-SW: prudence
• Sach-SW: auction
• Sach-SW: experiment
• Form-SW: Arbeitspapier
• Form-SW: Graue Literatur
• K10plus-PPN: 641661304

Abstract

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.