Template-type: ReDif-Paper 1.0
Author-Name: Kirchkamp Oliver 
Author-Name: Reiss J. Philipp 
Author-Name: Sadrieh Abdolkarim 
Author-workplace-name: METEOR
Title: A pure variation of risk in first-price auctions
Abstract: We introduce a new method of varying the risk that bidders face in first-price private value auctions. We find that decreasing bidders’ risk significantly reduces the degree of overbidding relative to the risk-neutral Bayesian-Nash equilibrium prediction. This implies that risk affects bidding behavior as generally expected in auction theory. While resolving a long-standing debate on the effect of risk on auction behavior, our results give rise to a new puzzle. As risk is diminished and overbidding decreases for most of the value range, a significant degree of underbidding sets in for very low values
Keywords: Economics (Jel: A)
Series: Research Memoranda
Creation-Date: 2006
Number: 058
File-URL: http://digitalarchive.maastrichtuniversity.nl/fedora/objects/guid:68d923b2-1200-4d18-8b89-377c7a6b9a4e/datastreams/ASSET1/content
File-Format: application/pdf
File-Size: 209252
Handle: RePEc:unm:umamet:2006058