Heterogeneous bids in auctions with rational and markdown bidders-Theory and Experiment
To structure our data we present and test a theory of constant markdown bids. While a fraction of bidders can be well described by Bayesian Nash equilibrium bids, a larger fraction seems to either use constant markdown bids or seems to rationally optimise against a population where some members use markdown bids and some are rational.
JEL-Classification: C92, D44
Keywords: Auction, Experiment, Overbidding, Underbidding, Risk-Aversion.
An earlier version of this paper has been circulated under the title “The overbidding-myth and the underbidding-bias in first-price auctions”. This paper is available as SFB 504 Working Paper 04-32 as a PDF file.
A more recent version (as of August 2008) can be found here.