Static vs Dynamic Auctions with Ambiguity Averse Bidders

M. Carvalho

Research output: Working paperDiscussion paperOther research output

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Abstract

Abstract: This paper presents the outcome of a dynamic price-descending auction when the distribution of the private values is uncertain and bidders exhibit ambiguity aversion. In contrast to sealed-bid auctions, in open auctions the bidders get information about the other bidders' private values and may therefore update their beliefs on the distribution of the values. The bidders have smooth ambiguity preferences and update their priors using consequentialist Bayesian updating. It is shown that ambiguity aversion usually affects bidding behavior the same way risk aversion does, but the main result is that this is not the case for continuous price descending auctions. This is new among a few theoretical cases where ambiguity aversion does not reinforce the risk aversion implications.
Original languageEnglish
Place of PublicationTilburg
PublisherEconomics
Number of pages23
Volume2012-022
Publication statusPublished - 2012

Publication series

NameCentER Discussion Paper
Volume2012-022

Fingerprint

Auctions
Ambiguity aversion
Risk aversion
Private values
Bidding behavior
Bayesian updating
Price dynamics
Sealed-bid auction

Keywords

  • Ambiguity
  • Auctions
  • Revenue Equivalence

Cite this

Carvalho, M. (2012). Static vs Dynamic Auctions with Ambiguity Averse Bidders. (CentER Discussion Paper; Vol. 2012-022). Tilburg: Economics.
Carvalho, M. / Static vs Dynamic Auctions with Ambiguity Averse Bidders. Tilburg : Economics, 2012. (CentER Discussion Paper).
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Carvalho, M 2012 'Static vs Dynamic Auctions with Ambiguity Averse Bidders' CentER Discussion Paper, vol. 2012-022, Economics, Tilburg.

Static vs Dynamic Auctions with Ambiguity Averse Bidders. / Carvalho, M.

Tilburg : Economics, 2012. (CentER Discussion Paper; Vol. 2012-022).

Research output: Working paperDiscussion paperOther research output

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Carvalho M. Static vs Dynamic Auctions with Ambiguity Averse Bidders. Tilburg: Economics. 2012. (CentER Discussion Paper).