Spite and Reciprocity in Auctions
The paper presents a complete information model of bidding in second price sealed-bid and ascending-bid (English) auctions, in which potential buyers know the unit valuation of other bidders and may spitefully prefer that their rivals earn a lower surplus. Bidders with spiteful preferences should ov...
| Main Authors: | , , , |
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| Format: | Article |
| Language: | English |
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MDPI AG
2011-09-01
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| Series: | Games |
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| Online Access: | http://www.mdpi.com/2073-4336/2/3/365/ |
| _version_ | 1818141616872882176 |
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| author | Yoshikazu Ikeda Tatsuyoshi Saijo Naoko Nishimura Timothy N. Cason |
| author_facet | Yoshikazu Ikeda Tatsuyoshi Saijo Naoko Nishimura Timothy N. Cason |
| author_sort | Yoshikazu Ikeda |
| collection | DOAJ |
| description | The paper presents a complete information model of bidding in second price sealed-bid and ascending-bid (English) auctions, in which potential buyers know the unit valuation of other bidders and may spitefully prefer that their rivals earn a lower surplus. Bidders with spiteful preferences should overbid in equilibrium when they know their rival has a higher value than their own, and bidders with a higher value underbid to reciprocate the spiteful overbidding of the lower value bidders. The model also predicts different bidding behavior in second price as compared to ascending-bid auctions. The paper also presents experimental evidence broadly consistent with the model. In the complete information environment, lower value bidders overbid more than higher value bidders, and they overbid more frequently in the second price auction than in the ascending price auction. Overall, the lower value bidder submits bids that exceed value about half the time. These patterns are not found in the incomplete information environment, consistent with the model. |
| first_indexed | 2024-12-11T11:02:43Z |
| format | Article |
| id | doaj.art-0c9efc8fdef4458894f096ca5b35cb95 |
| institution | Directory Open Access Journal |
| issn | 2073-4336 |
| language | English |
| last_indexed | 2024-12-11T11:02:43Z |
| publishDate | 2011-09-01 |
| publisher | MDPI AG |
| record_format | Article |
| series | Games |
| spelling | doaj.art-0c9efc8fdef4458894f096ca5b35cb952022-12-22T01:09:49ZengMDPI AGGames2073-43362011-09-012336541110.3390/g2030365Spite and Reciprocity in AuctionsYoshikazu IkedaTatsuyoshi SaijoNaoko NishimuraTimothy N. CasonThe paper presents a complete information model of bidding in second price sealed-bid and ascending-bid (English) auctions, in which potential buyers know the unit valuation of other bidders and may spitefully prefer that their rivals earn a lower surplus. Bidders with spiteful preferences should overbid in equilibrium when they know their rival has a higher value than their own, and bidders with a higher value underbid to reciprocate the spiteful overbidding of the lower value bidders. The model also predicts different bidding behavior in second price as compared to ascending-bid auctions. The paper also presents experimental evidence broadly consistent with the model. In the complete information environment, lower value bidders overbid more than higher value bidders, and they overbid more frequently in the second price auction than in the ascending price auction. Overall, the lower value bidder submits bids that exceed value about half the time. These patterns are not found in the incomplete information environment, consistent with the model.http://www.mdpi.com/2073-4336/2/3/365/ascending-bid auctionsecond price auctionexperimentdominant strategysocial preferencesspitereciprocityEnglish auction |
| spellingShingle | Yoshikazu Ikeda Tatsuyoshi Saijo Naoko Nishimura Timothy N. Cason Spite and Reciprocity in Auctions Games ascending-bid auction second price auction experiment dominant strategy social preferences spite reciprocity English auction |
| title | Spite and Reciprocity in Auctions |
| title_full | Spite and Reciprocity in Auctions |
| title_fullStr | Spite and Reciprocity in Auctions |
| title_full_unstemmed | Spite and Reciprocity in Auctions |
| title_short | Spite and Reciprocity in Auctions |
| title_sort | spite and reciprocity in auctions |
| topic | ascending-bid auction second price auction experiment dominant strategy social preferences spite reciprocity English auction |
| url | http://www.mdpi.com/2073-4336/2/3/365/ |
| work_keys_str_mv | AT yoshikazuikeda spiteandreciprocityinauctions AT tatsuyoshisaijo spiteandreciprocityinauctions AT naokonishimura spiteandreciprocityinauctions AT timothyncason spiteandreciprocityinauctions |