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Theodore L. Turocy,
Behavioural game theorist
Director, Centre for Behavioural and Experimental Social Science, University of East Anglia Senior Lecturer, School of Economics, University of East Anglia Director, The Gambit Project |
Auction choice for ambiguity-averse sellers facing strategic uncertainty
- Citation:
- Turocy, T.L. (2008) Auction choice for ambiguity-averse sellers facing strategic uncertainty. Games and Economic Behavior 62(1): 155-179. DOI:10.1016/j.geb.2007.03.009
- Abstract:
- The robustness of the Bayes–Nash equilibrium prediction for seller revenue in auctions is investigated. In a framework of interdependent valuations generated from independent signals, seller expected revenue may fall well below the equilibrium prediction, even though the individual payoff consequences of suboptimal bidding may be small for each individual bidder. This possibility would be relevant to a seller who models strategic uncertainty as ambiguity, and who is ambiguity-averse in the sense of Gilboa and Schmeidler. It is shown that the second-price auction is more exposed than the first-price auction to lost revenue from the introduction of bidder behavior with small payoff errors.
- Keywords:
- Auctions; strategic uncertainty; ambiguity aversion; robustness.
- JEL classification:
- D44; D81.
- Availability:
- http://dx.doi.org/10.1016/j.geb.2007.03.009