An experimental evaluation of bidders' behavior in ad auctions (original) (raw)
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Understanding Overbidding in Second Price Auctions: An Experimental Study
The Economic Journal, 2008
This paper presents results from a series of second price private value auction (SPA) experiments in which bidders are either given for free, or are allowed to purchase, noisy signals about their opponents' value. Even though theoretically such information about oppoents' value has no strategetic use in the SPA, it provides us with a convenient instrument to change bidders' perception about the \strength" (i.e. the value) of their opponent. We argue that the empirical relationship between the incidence and magnitude of overbidding and bidders' perception of the strength of their opponent provides the key to understand whether overbidding in second price auctions are driven by \spite" motives or by the \joy of winning." The experimental data show that bidders are much more likely to overbid, though less likely to submit large overbid, when they perceive their rivals to have similar values as their own. We argue that this empirical relationship is more consistent with a modi ed \joy of winning" hypothesis than with the \spite" hypothesis. However, neither of the non-standard preference explanations are able to fully explain all aspects of the experimental data, and we argue for the important role of bounded rationality. We also nd that bidder heterogeneity plays an important role in explaining their bidding behavior.
RePEc: Research Papers in Economics, 1999
We examine learning behavior in auctions and fair division games with independent private values under two di¤erent price rules, …rst and second price. Participants face these four games repeatedly and submit complete bid functions rather than single bids. This allows us to examine whether learning is in ‡uenced by the structural di¤erences between games. We …nd that within the time horizon which we investigate, learning does not drive toward risk neutral equilibrium bidding and characterize some features of observed learning: Bid functions are adjusted globally rather than locally, decision time matches the sequencing structure of game types, game rules do matter, and directional learning theory o¤ers a partial explanation for bid adjustments. The evidence supports a cognitive approach to learning.
An Experimental Study of Sponsored-Search Auctions
SSRN Electronic Journal, 2000
We study the Generalized Second Price auctions-a standard method for allocating online search advertising-experimentally, considering both the static environment assumed by the prevailing theory and a dynamic game capturing the salient aspects of real-world search advertising auctions. Subjects of our experiment bid consistently with the leading equilibrium notions, but exhibit significant overbidding relative to the Vickrey-Clarke-Groves (VCG) outcome favored as an equilibrium selection in the literature. The observed bidding behavior is well explained by a model that explicitly accounts for the strategic uncertainty facing a bidder, which suggests strategic uncertainty as a source of the observed departure from the VCG outcome. Meanwhile, the observed bidding behavior in the dynamic game resembles the behavior in the static * We are grateful to game. Our analysis thus lends support to the use of a static game as modeling proxy, but calls into question the prevailing equilibrium selection.
Don’t Fear the Simplicity-An Experimental Analysis of Auctions
2017
5 I evaluate the performance of four static sealed-bid package auctions in an experimental 6 setting with complementarities. The valuation model comprises two items, and three bidders: 7 two ‘local’ bidders demand one item only, while the third (global) bidder only wants both. 8 The rules I compare include the Vickrey and first-price auctions, Vicrkey Nearest Rule 9 and the Reference Rule. Auction-level tests find the first-price auction revenue dominant 10 overall without losing efficiency, while the Vickrey auction performs worst; the other two 11 rules rank intermediate. Bidder-level tests of the experimental data reject the competitive 12 equilibrium bidding functions: overbidding is widespread in all four auctions, and bidders 13 are averse to submitting boundary bids. In core-selecting auctions bidders do not revert 14 to truth-telling rules of thumb. I also observe behavior consistent with collusive bidding 15 in the Vickrey auction. Contrary to theoretical predictions, the V...
Bidding behavior in the price is right game: an experimental study
Journal of Economic Behavior & Organization, 2004
In this paper, we present an experimental test of a bidding game identical to the one seen on the television game show "The Price is Right". Four players make sequential guesses about the price of an item and the player whose guess is closest to the price without exceeding it wins the item.
An empirical investigation into the structure of bidding in online auctions
Electronic Markets, 2005
The study maps the bidding patterns of 1,051 completed English auctions from the eBay website to study their structural patterns. The overall pattern appears to be a cubic. People initially bid the price to 60–70% of the final value. The price levels off only to take off near the end of the auction, when it reaches its final price. The second part of the study measures the effects of information on bidding. The effect of secret reserve price information on auctions is compared for differences in bidder participation and resultant final values. The results ...
Journal of Economic Behavior & Organization, 2015
We study in the laboratory a series of first price sealed bid auctions of a common value good. Bidders face three types of information: private information, public information and common uncertainty. Auctions are characterized by the relative size of these three information elements. Only half of our subjects bid differently depending on whether the last piece of information obtained is private or public but they do not react to each type of information as predicted by theory. The other half of the subjects do not distinguish between private and public information and either consistently underbid or consistently overbid.
Bidding behavior and experience in internet auctions
European Economic Review, 2013
We study the role of experience in internet art auctions by analyzing repeated bidding by the same bidder in a unique longitudinal field dataset. Our results show that experience significantly lowers the level of bids suggesting that bidders change their bidding behavior throughout time. Participating in more than ten auctions brings down average bids by up to 26%. We further test several possible explanations for the observed learning behavior and show that the change in bidding strategy is a result of a change in within-auction behavior that is generated with experience. Our results are robust to concerns of endogenous participation as well as bidder fixed effects.
Economics, Psychology, and Social Dynamics of Consumer Bidding in Auctions
Marketing Letters, 2005
With increasing numbers of consumers in auction marketplaces, we highlight some recent approaches that bring additional economic, social, and psychological factors to bear on existing economic theory to better understand * This paper is based on the special session at the 6th Triennial Invitational Choice Symposium, University of Colorado Boulder, June 2004 (co-chaired by the first two authors). † Corresponding author.