eprintid: 14880
rev_number: 18
eprint_status: archive
userid: 2744
dir: disk0/00/01/48/80
datestamp: 2013-06-03 08:16:25
lastmod: 2015-04-25 06:09:45
status_changed: 2013-06-03 08:16:25
type: workingPaper
metadata_visibility: show
creators_name: Brunner, Christoph
creators_name: Hu, Audrey
creators_name: Oechssler, Jörg
title: Premium Auctions and Risk Preferences: An Experimental Study
subjects: ddc-330
divisions: i-181000
keywords: premium auction, risk preference, Holt-Laury method, experimental economics.
abstract: In premium auctions, the highest losing bidder receives a reward from the seller. This paper studies the private value English premium auction (EPA) for different risk attitudes of bidders. We explicitly derive the symmetric equilibrium for bidders with CARA utilities and conduct an experimental study to test the theoretical predictions. In our experiment, subjects are sorted into risk-averse and risk loving groups. We find that revenues in the EPA are significantly higher when bidders are risk loving rather than risk averse. These results are partly consistent with theory and confirm the general view that bidders’ risk preferences constitute an important factor that affects bidding behavior and consequently also the seller’s expected revenue. However, individual subjects rarely follow the equilibrium strategy and as a result, revenue in our experiment is lower than in the symmetric equilibrium.
date: 2013-04
id_scheme: DOI
id_number: 10.11588/heidok.00014880
schriftenreihe_cluster_id: sr-3
schriftenreihe_order: 0544
ppn_swb: 1652447407
own_urn: urn:nbn:de:bsz:16-heidok-148805
language: eng
bibsort: BRUNNERCHRPREMIUMAUC201304
full_text_status: public
series: Discussion Paper Series / University of Heidelberg, Department of Economics
volume: 0544
pages: 9
citation:   Brunner, Christoph ; Hu, Audrey ; Oechssler, Jörg  (2013) Premium Auctions and Risk Preferences: An Experimental Study.  [Working paper]     
document_url: https://archiv.ub.uni-heidelberg.de/volltextserver/14880/1/Brunner_Hu_Oechssler_2013_dp544.pdf