Paper Info
Title
Step-Level Reasoning and Bidding in Auctions
Abstract
Step-level models of reasoning (SLR) proved to be very successful in predicting behavior in the beauty contest game. Recently, a quantified version of the model was suggested as a more general model of thinking. In particular, it was found that, the distribution of choices could be represented by a Poisson distribution. I test the model in stylized first- and second-price common-value sealed-bid auctions. Equilibrium, for both auction types, prescribes that players undercut each other and profits are small. The SLR prediction, on the other hand, is different for the two auctions. Nash equilibrium predicts the outcomes poorly; the SLR model predicts the outcomes well in the second-price auction. However, while bids in the first-price auction could be represented by a Poisson distribution, this could not be attributed to step-level reasoning.
Year
DOI
Venue
2005
10.1287/mnsc.1050.0423
MANAGEMENT SCIENCE
Keywords
Field
DocType
depth of reasoning,bidding behavior
Economics,Mathematical economics,Combinatorial auction,Microeconomics,Stylized fact,Common value auction,Auction theory,Poisson distribution,Nash equilibrium,Revenue equivalence,Bidding
Journal
Volume
Issue
ISSN
51
11
0025-1909
Citations 
PageRank 
References 
4
0.86
0
Authors
1
Name
Order
Citations
PageRank
Uri Gneezy17639.16