An Experimental Test of Precautionary Bidding

Arbeitspapier

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.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: Munich Discussion Paper ; No. 2010-30

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Design of Experiments: Laboratory, Individual ; Auctions ; Criteria for Decision-Making under Risk and Uncertainty
• Thema: precautionary bidding ; prudence ; auction ; experiment ; Auktionstheorie ; Entscheidung bei Risiko ; Risikoprämie ; Test

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Kocher, Martin G. ; Pahlke, Julius ; Trautmann, Stefan T.
• Ereignis: Veröffentlichung
• (wer): Ludwig-Maximilians-Universität München, Volkswirtschaftliche Fakultät
• (wo): München
• (wann): 2010

Weitere Informationen

• DOI: doi:10.5282/ubm/epub.11743
• Handle: http://hdl.handle.net/10419/104329
• URN: urn:nbn:de:bvb:19-epub-11743-5
• Letzte Aktualisierung: 10.03.2025, 11:44 MEZ