The evolution of bidding behavior in private-values auction and double auctions

Arbeitspapier

We apply stochastic stability to study the evolution of bidding behavior in private-values second-price, first-price and k-double auctions. The learning process has a strong component of inertia but with a small probability, the bids are modified in the direction of ex-post regrets. We identify essentially a unique bid that will be used by each type in the long run. In the second-price auction, this is the truthful bid. In the first-price auction, bidding half of one’s valuation is stable. The stable bid in the k-double auction is a toughening of the Chatterjee-Samuelson linear equilibrium strategy. If we add a friction in changing one’s bid, then truth-telling behavior is also obtained in the first-price and k-double auctions. Intuitively, the stochastically stable bid minimizes the maximal regret.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Working Paper ; No. 2007-01

Classification and Topics

• Classification: Wirtschaft ; Stochastic and Dynamic Games; Evolutionary Games; Repeated Games ; Bargaining Theory; Matching Theory ; Auctions ; Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
• Subject: Stochastic Stability ; Ex-post Regret ; Second-Price Auction ; First-Price Auction ; k-Double Auction ; Auktionstheorie

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Saran, Rene ; Serrano, Roberto
• Event: Veröffentlichung
• (who): Brown University, Department of Economics
• (where): Providence, RI
• (when): 2007

Further information

• Handle: http://hdl.handle.net/10419/80151
• Last update: 10.03.2025, 11:43 AM CET