A major problem with assessing the extent of strategic behavior in standard auction
experiments is the stochastic structure of the experiment: in each round, there is only one
winner and each bidder receives a new value and is asked to submit one bid. Hence, the
behavior observed in these experiments can be influenced by the history of the game (e.g., the
realization of valuations and the number of times a bidder won the auction). To circumvent
this problem, we use a design that induces a bidder to think how to bid for each possible
valuation that she/he may receive instead of for one specific valuation that she/he receives.
This design (which is explained in section 3) was proposed by Selten and Buchta (1998) and
consists in asking each subject to submit a complete bid function (i.e., that produces a bid for
each possible value) before she/he receives her/his private value. Since this change in bidders’
response mode does not affect the information structure or the strategic implications of
bidding in first-price auctions, we believe that it can provide helpful insights into bidders’
strategic behavior.
Our results indicate that the submitted bid functions support the basic behavioral and revenue
predictions of the Nash equilibrium models for symmetric and asymmetric auctions. Bidding
behavior in the symmetric auctions can be explained by the CRRA model that assumes
homogenous bidders whereas in the asymmetric auctions, it is equally well explained by the
standard Nash equilibrium model for risk neutral bidders as by the CRRA model for
homogenous bidders. However, when we check the shape of individual bid functions, we find
that in the symmetric framework, the predominant submission of concave bid functions does
not support the predictions of the CRRA model for homogenous or heterogeneous risk averse
bidders. Nevertheless, about 60% of all bid functions do match the concave shape of the
corresponding best-reply functions, which are concave in 84% of the time. In the asymmetric
treatments, both Strong and Weak bidders overbid mostly at low values, for which they
should submit zero bids, whether they are risk neutral or reasonably risk averse. In terms of