Inverse S-shaped probability weighting functions in first-price sealed-bid auctions

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dc.citation.epage67en_US
dc.citation.issueNumber1en_US
dc.citation.spage57en_US
dc.citation.volumeNumber20en_US
dc.contributor.authorKeskin, K.en_US
dc.date.accessioned2018-04-12T10:57:36Z
dc.date.available2018-04-12T10:57:36Z
dc.date.issued2016en_US
dc.departmentDepartment of Economicsen_US
dc.description.abstractIt is often observed in first-price sealed-bid auction experiments that subjects tend to bid above the risk neutral Nash equilibrium predictions. One possible explanation for this overbidding phenomenon is that bidders subjectively weight their winning probabilities. In the relevant literature, the probability weighting functions (PWFs) suggested to explain overbidding imply the underweighting of all probabilities. However, such functions are not in accordance with the PWFs commonly used in the literature (i.e., inverse S-shaped functions). In this paper we introduce inverse S-shaped PWFs into first-price sealed-bid auctions and investigate the extent to which such weighting functions explain overbidding. Our results indicate that bidders with low valuations underbid, whereas those with high valuations overbid. We accordingly conclude that inverse S-shaped PWFs provide a partial explanation for overbidding. © 2015, Springer-Verlag Berlin Heidelberg.en_US
dc.description.provenanceMade available in DSpace on 2018-04-12T10:57:36Z (GMT). No. of bitstreams: 1 bilkent-research-paper.pdf: 179475 bytes, checksum: ea0bedeb05ac9ccfb983c327e155f0c2 (MD5) Previous issue date: 2016en
dc.identifier.doi10.1007/s10058-015-0183-8en_US
dc.identifier.issn1434-4742
dc.identifier.urihttp://hdl.handle.net/11693/36929
dc.language.isoEnglishen_US
dc.publisherSpringer Verlagen_US
dc.relation.isversionofhttp://dx.doi.org/10.1007/s10058-015-0183-8en_US
dc.source.titleReview of Economic Designen_US
dc.subjectFirst-price auctionsen_US
dc.subjectInverse S-shaped functionsen_US
dc.subjectOverbiddingen_US
dc.subjectSubjective probability weightingen_US
dc.titleInverse S-shaped probability weighting functions in first-price sealed-bid auctionsen_US
dc.typeArticleen_US

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