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- Title
Auctions with selective entry and risk averse bidders: theory and evidence.
- Authors
Li, Tong; Lu, Jingfeng; Zhao, Li
- Abstract
We study auctions with selective entry and risk averse bidders. Our model accounts for risk averse bidders' endogenous participation decision and thus encompasses the existing entry models. We establish entry and bidding equilibrium in first-price auction and ascending auction mechanisms and show that bidders' entry behavior differs between these two mechanisms with different forms of risk aversion. Our approach provides testable implications of risk aversion in terms of entry behavior. We analyze a timber auction data set and propose a simple test for the form of bidders' risk aversion based on our model implications.
- Subjects
AUCTIONS; RISK aversion; BIDDERS; DECISION making in economic policy; ECONOMIC equilibrium; PSYCHOLOGY
- Publication
RAND Journal of Economics (Wiley-Blackwell), 2015, Vol 46, Issue 3, p524
- ISSN
0741-6261
- Publication type
Article
- DOI
10.1111/1756-2171.12096