Experiments with first price auctions find typically a substantial amount of overbidding which is often related to risk aversion. If this could be generalised then first-price auctions should generate a higher revenue then second-price auctions. We show that at least part of this overbidding is...

We introduce and experimentally test an auction model that allows for outside options of bidders as substitutes for the auctioned object under the private values assumption. Theoretically and in the experiments, bidders respond to their individual outside options and to variations of common...