Entry decisions and bidding behavior in sequential first-price procurement auctions: An Experimental Study

J.P. Reiss, J. Brosig

Research output: Contribution to journalArticleAcademicpeer-review

Abstract

Though many real life auctions are run independently of each other, from the bidders' point of view they often form sequences of auctions. We investigate how behavior responds to the additional incentives that are present in such auction sequences. Comparing subjects' decisions in single first-price procurement auctions with their decisions in a game consisting of two subsequent first-price procurement auctions, we find that, in line with the theoretical prediction, entry and bidding behavior is crucially affected by the opportunity cost of early bid submission. Though, entry decisions and average bids in the auction sequence systematically deviate from the perfect bayesian equilibrium prediction. While the nature of the opponent (human being or computer) has no significant effect on these findings, giving subjects additional feedback on winners and prices seems to reduce the deviations from the equilibrium prediction.
Original languageEnglish
Pages (from-to)50-74
Number of pages25
JournalGames and Economic Behavior
Volume58
Issue number1
DOIs
Publication statusPublished - 1 Jan 2007

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