Sophisticated Bidders in Beauty-Contest Auctons

Abstract : We study bidding behavior by firms in beauty-contest auctions, i.e. auctions in which the winning bid is the one which gets closet to some function (average) of all submitted bids. Using a dataset on public procurement beauty-contest auctions, we show that firms' observed bidding behavior departs from equilibrium and can be predicted by a sophistication index, which captures the firms' accumulated capacity of bidding close to optimality in the past. We show that our empirical evidence is consistent with a Cognitive Hierarchy model of bidders' behavior. We also investigate whether and how firms learn to bid strategically through experience.
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https://halshs.archives-ouvertes.fr/halshs-01440891
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Submitted on : Thursday, January 19, 2017 - 3:25:14 PM
Last modification on : Wednesday, January 31, 2018 - 5:02:02 PM
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Stefano Galavotti, Luigi Moretti, Paola Valbonesi. Sophisticated Bidders in Beauty-Contest Auctons. 2017. ⟨halshs-01440891⟩

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