Selten, Reinhard, and Joachim Buchta
Title: Experimental Sealed Bid First Price Auctions with Directly Observed Bid Functions
Abstract: Nine groups of three subjects each repeatedly interacted in sealed bid first price auctions for fifty periods. In every period each subject specified a piecewise linear bid function shown on the computer screen. Then random values were drawn for each subject and bids were determined according to the bid functions. The object was sold to the highest bidder at the price of his bid. Many bid functions were almost linear but a substantial fraction of them was non-monotonous. The subjects changed their bid functions considerably during the fifty periods of play. The direction of change exhibits marked regularities which can be explained by a "learning direction theory". The bid at last period's value tends to be lowered or not to be increased after the object has been obtained; it tends to be increased or not to be lowered if the object was not obtained but the price was below the value. A typicity analysis shows that subjects conform to the predictions of learning direction theory the more strongly the more typical they are.
Creation-Date: February 1994
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