Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/25706
Authors: 
Kirchkamp, Oliver
Reiss, J. Philipp
Sadrieh, Abdolkarim
Year of Publication: 
2006
Series/Report no.: 
Jena economic research papers 2008,024
Abstract: 
We introduce a new method of varying the risk that bidders face in …rst-price private value auctions. We …nd that decreasing bidders’ risk signi…cantly reduces the degree of overbidding relative to the risk-neutral Bayesian-Nash equilibrium prediction. This implies that risk a¤ects bidding behavior as generally expected in auction theory. While resolving a long-standing debate on the e¤ect of risk on auction behavior, our results give rise to a new puzzle. As risk is diminished and overbidding decreases for most of the value range, a signi…cant degree of underbidding sets in for very low values.
Subjects: 
risk
first-price auctions
risk-aversion
overbidding
JEL: 
C92
D44
Document Type: 
Working Paper

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