Loss aversion in sequential auctions
Copyright policy )Loss aversion in sequential auctions
I analyze sequential auctions with expectations‐based loss‐averse bidders who have independent private values and unit demand. Equilibrium bids are history dependent and subject to a “discouragement effect”: the higher is the winning bid in the current round, the less aggressive are the bids of the remaining bidders in the next round. Moreover, because they experience a loss in each round in which they fail to obtain an object, bidders are willing to pay a premium to win sooner rather than later. This desire to win earlier leads prices to decline in equilibrium. I also show how various disclosure policies regarding the outcome of earlier auctions affect equilibrium bids, and that sequential and simultaneous auctions are neither bidder‐payoff equivalent nor revenue equivalent.
- University of Queensland Australia
- University Federico II of Naples Italy
- University of Melbourne Australia
- University of California, Berkeley United States
- University of Bern Switzerland
ddc:330, Loss Aversion; Sequential Auctions; Afternoon Effect., Afternoon Effect, Sequential Auctions, D81, Auctions, bargaining, bidding and selling, and other market models, loss aversion, D82, Loss aversion, afternoon effect, D03, 2000 Economics, Econometrics and Finance, sequential auctions, D44, Loss Aversion
ddc:330, Loss Aversion; Sequential Auctions; Afternoon Effect., Afternoon Effect, Sequential Auctions, D81, Auctions, bargaining, bidding and selling, and other market models, loss aversion, D82, Loss aversion, afternoon effect, D03, 2000 Economics, Econometrics and Finance, sequential auctions, D44, Loss Aversion
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