Selection into auctions for risky and ambiguous prospects

M.G. Kocher, S.T. Trautmann

Research output: Contribution to journalArticleScientificpeer-review

Abstract

We study experimentally the selection into first-price sealed-bid auctions for a risky or an ambiguous prospect. Most subjects chose to submit a bid for the risky prospect, leading to thinner markets for the ambiguous prospect. Transaction prices for both prospects were equal although subjects expected the ambiguous markets to be smaller. Evidence of a positive correlation between risk and ambiguity aversion suggests that the ambiguous markets were populated by relatively risk tolerant bidders. A control experiment with selection in a simple choice task shows that subjects correctly anticipate the effects of selection on market size and risk attitudes.
Original languageEnglish
Pages (from-to)882-895
JournalEconomic Inquiry
Volume51
Issue number1
DOIs
Publication statusPublished - 2013

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Auctions
Bid
First-price sealed-bid auction
Risk attitude
Transaction price
Market risk
Experiment
Market size
Risk aversion
Ambiguity aversion
Thin markets

Cite this

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Selection into auctions for risky and ambiguous prospects. / Kocher, M.G.; Trautmann, S.T.

In: Economic Inquiry, Vol. 51, No. 1, 2013, p. 882-895.

Research output: Contribution to journalArticleScientificpeer-review

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