Dutch vs. first-price auctions with expectations-based loss-averse bidders
type: Item
instance of: scholarly article
title: Dutch vs. first-price auctions with expectations-based loss-averse bidders
zbMATH Open document ID: 1504.91116
author: Benjamin Balzer
author: Antonio Rosato
author: Jonas von Wangenheim
published in: Journal of Economic Theory
publication date: 2022-11-09T00:00:00Z
review text: In this paper, the authors provide a novel explanation for the strategic (and hence, revenue) nonequivalence between the first-price auctions (FPA) and the Dutch auction based on reference-dependent preferences and loss aversion and show that loss-averse bidders bid more aggressively in the Dutch auction than in the FPA. It is shown that the symmetric preferred personal equilibrium (PPE) bidding strategy in the Dutch auction is given by \[ \beta_{DA}(\theta)= \int_{\underline \theta}^{\theta} \frac{1+\eta^g\lambda^g}{F_1(\theta)(1+\eta^m\lambda^m)}\left [\frac{F_1(\theta)}{F_1(x)}\right ]^{\frac{\eta^m(\lambda^m-1)}{1+\eta^m\lambda^m}}xf_1(x)dx. \] The basic result is contained in Proposition 4: In the Dutch auction there exists a cut-off type \(\theta^{\ast}\in (\underline \theta,\overline \theta)\) such that all types \(\theta < \theta^{\ast}\) would ex-ante increase their utility by deviating to a lower bidding strategy. Section 5 concludes the paper by discussing some implications of authors results.
reviewed by: Nikolay Kyurkchiev
Mathematics Subject Classification ID: 91B26
zbMATH DE Number: 7614328
zbMATH Keywords: loss aversion
zbMATH Keywords: Dutch auctions
zbMATH Keywords: revenue equivalence
zbMATH Keywords: personal equilibrium
MaRDI profile type: Publication
full work available at URL: j.jet.2022.105545
OpenAlex ID: W3190045006
cites work: Credible Auctions: A Trilemma
cites work: Le Comportement de l'Homme Rationnel devant le Risque: Critique des Postulats et Axiomes de l'Ecole Americaine
cites work: Robust bidding and revenue in descending price auctions
cites work: First-Price Auctions With General Information Structures: Implications for Bidding and Revenue
cites work: Slow Dutch Auctions
cites work: Expectation-based loss aversion and strategic interaction
cites work: Regular prices and sales
cites work: On the equivalence between descending bid auctions and first price sealed bid auctions
cites work: Dynamic Consistency, Revelations in Auctions and the Structure of Preferences
cites work: Time is money: The effect of clock speed on seller's revenue in Dutch auctions
cites work: A Model of Reference-Dependent Preferences*
cites work: Multi-dimensional reference-dependent preferences in sealed-bid auctions -- how (most) laboratory experiments differ from the field
cites work: Intertemporal incentives under loss aversion
cites work: Incentive Compatibility and the Bargaining Problem
cites work: Optimal Auction Design
cites work: First-price auctions, Dutch auctions, and buy-it-now prices with Allais paradox bidders
cites work: Second price auctions without expected utility
cites work: Expectations-Based Reference-Dependent Life-Cycle Consumption
cites work: A News-Utility Theory for Inattention and Delegation in Portfolio Choice
cites work: Using clock auctions to dissolve partnership: an experimental study
cites work: English versus Vickrey auctions with loss-averse bidders
DOI: 10.1016/J.JET.2022.105545
description: scientific article; zbMATH DE number 7614328