Risk aversion and overbidding in first price sealed bid auctions. New experimental evidence

Sascha Füllbrunn, Dirk Jan Janssen, Utz Weitzel

Research output: Contribution to JournalArticleAcademicpeer-review

Abstract

Bidding above the risk-neutral Nash equilibrium in first price sealed bid auctions has traditionally been ascribed to risk aversion. Later studies, however, offer other explanations and even argue that risk aversion plays no or a minor role. In a novel experimental design, we directly test the relationship between risk aversion and overbidding by systematically varying the distribution of risk attitudes in auction markets. We find a significant relationship between our measure of risk aversion and overbidding. (JEL D44, C91).

Original languageEnglish
Pages (from-to)631-647
Number of pages17
JournalEconomic Inquiry
Volume57
Issue number1
DOIs
Publication statusPublished - 1 Jan 2019

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