Elicited bid functions in (a)symmetric first-price auctions



encompass risk neutrality as a special case.4 In a symmetric setting, the expected utility
representation of such preferences is

U(vi,b) = (vi - b)rF(f (b))       with r> 0                   (4)

When r = 1, (4) characterizes a risk neutral utility function whereas for r < 1, the marginal
utility of an additional unit of income decreases so that bidders’ display constant relative risk
aversion. The Risk Averse Nash Equilibrium (RANE) bidding strategy for symmetric first-
price auctions with two bidders then takes the following expression

ʌɪ

b(v) = v


F(v)


dx


(5)


For asymmetric first-price auctions there usually are no closed-form RANE equilibrium bid
functions so that these can only be determined numerically. We derive both the RNNE and
RANE bid functions for our asymmetric framework in the next section.

2. Experimental Design and Procedure

2.1. Design

We consider two-bidder first-price auctions as described in the previous section and we study
three treatments: one that involves symmetric bidders and two that involve asymmetric
bidders (i.e., a Strong bidder and a Weak bidder). All bidders have their values drawn from
uniform distributions. In our symmetric treatment, all bidders draw their values from
IS =
[0;100]. In our asymmetric treatments, the range of values of the Strong bidders is also
IS but

4 See Holt and Davis (1995) for an outline on the use of the constant absolute and constant relative risk aversion



More intriguing information

1. The name is absent
2. CONSUMER ACCEPTANCE OF GENETICALLY MODIFIED FOODS
3. National curriculum assessment: how to make it better
4. Empirically Analyzing the Impacts of U.S. Export Credit Programs on U.S. Agricultural Export Competitiveness
5. The Prohibition of the Proposed Springer-ProSiebenSat.1-Merger: How much Economics in German Merger Control?
6. Effects of red light and loud noise on the rate at which monkeys sample the sensory environment
7. Social Irresponsibility in Management
8. The name is absent
9. Ventas callejeras y espacio público: efectos sobre el comercio de Bogotá
10. Public Debt Management in Brazil