Bidding behavior given point and interval values in a second-price auction

B-Tier
Journal: Journal of Economic Behavior and Organization
Year: 2014
Volume: 97
Issue: C
Pages: 126-137

Authors (2)

Banerjee, Prasenjit (not in RePEc) Shogren, Jason F. (University of Wyoming)

Score contribution per author:

1.005 = (α=2.01 / 2 authors) × 1.0x B-tier

α: calibrated so average coauthorship-adjusted count equals average raw count

Abstract

Although rational choice theory presumes people have a point estimate of their willingness to pay (WTP) for a good or service, the idea of coherent arbitrariness suggests they have an interval of values. Herein we explore bidding behavior in a second-price auction in which bidders have point or interval values and point or interval bidding. We find bidders bid rationally: (i) when bidders have a point value but are asked to state an interval bid, they choose to bid as an interval with the point value as the mean of the interval; (ii) bidders who had a value interval but are asked to bid as a point estimate bid the expected value from the interval; and (iii) bidders with an interval value and who bid an interval such that expected bids equate expected values.

Technical Details

RePEc Handle
repec:eee:jeborg:v:97:y:2014:i:c:p:126-137
Journal Field
Theory
Author Count
2
Added to Database
2026-01-29