Berlin 2008 – scientific programme

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AKSOE: Arbeitskreis Physik sozio-ökonomischer Systeme

AKSOE 14: Financial Markets and Risk Management II

AKSOE 14.1: Invited Talk

Thursday, February 28, 2008, 09:30–10:15, EW 203

Risk, Expectations and Bidding in First Price Auctions — •Oliver Kirchkamp — Universität Jena; 07743 Jena

Bids in private value first-price auctions consistently deviate from risk neutral symmetric equilibrium bids. We first present results of a new experiment that measures the impact of risk aversion on actual bidding behaviour. We then present a procedure which allows to study the formation of expectations separately from the determination of a best reply against these expectations. We find that deviations from Bayesian Nash equilibrium are not due to wrong expectations but due to deviations from a best replies. We finally discuss how boundedly rational functions can provide a better explanation for actual bidding behaviour.