IS BIDDING BEHAVIOR CONSISTENT WITH BIDDING THEORY FOR PRIVATE VALUE AUCTIONS

Abstract

We analyze data from first-price auction experiments with independent private values for consistency with equilibrium bidding models. Three models are considered: the log-concave model (Cox, Smith, and Walker 1988); the constant relative risk averse model (Cox, Roberson, and Smith 1982; Cox, Smith, and Walker 1982); and the risk neutral model (Vickrey 1961). These models are nested in that the log-concave model contains the constant relative risk averse model (hereafter, CRRAM) as a special case, and CRRAM contains the risk neutral model as a special case. We find that: (a) almost all of the data are consistent with the log-concave model; (b) data for about one-half of the subjects are consistent with

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