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Irrationality in English Auctions

[journal article]

Gonçalves, Ricardo

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Abstract This paper explores the effects of a particular form of irrational behaviour by participating bidders in a common value English auction. We allow bidders to update their expected valuation of the good as the current price increases, assuming that their opponents always play the symmetric Nash equilibrium. When only one bidder adopts this type of behaviour, it is ambiguous whether the final auction price is higher or lower than at the symmetric equilibrium. However, when both bidders behave irrationally, the final auction price is never lower than the symmetric equilibrium provided bidders “match” their strategies.
Classification General Psychology
Document language English
Publication Year 2008
Page/Pages p. 180-192
Journal Journal of Economic Behavior & Organization, 67 (2008) 1
Status Postprint; peer reviewed
Licence PEER Licence Agreement (applicable only to documents from PEER project)