We study first- and second-price private value auctions with sequential bidding where second movers may discover the first movers bids. There is a unique equilibrium in the first-price auction and multiple equilibria in the second-price auction. Consequently, comparative statics across price...

People overestimate the probability that others share their values or preferences. I introduce type projection equilibrium (TPE) to capture such projection in Bayesian games. TPE allows each player to believe his opponents share his type with intermediate probability \rho. After establishing...

Overbidding in auctions has been attributed to risk aversion, loser regret, level-k, and cursedness, though relying on different identifying assumptions. I argue that "type projection" organizes these findings and better captures observed behavior. Type projection formally models that people...

We present results from an experiment with a within-subject design aimed at testing a unique prediction of expectations-based reference-dependent preferences and loss aversion in private-value second-price (Vickrey) auctions. If bidders have expectationsbased reference-dependent preferences, the...

We present results from an experiment with a within-subject design aimed at testing a unique prediction of expectations-based reference-dependent preferences and loss aversion in private-value second-price (Vickrey) auctions. If bidders have expectationsbased reference-dependent preferences, the...

Several studies show that sensory cues influence consumer decision making processes. While scent is a key component of a market's physical environment, it has received far less attention in the academic literature as compared, for example, with visual cues. In addition, most of the studies that...

While a basic theoretical principle in public economics assumes that individuals optimize fully with respect to the introduction of a tax, a growing body of research is proving that several heuristics are in place when people take decisions. We re-examine the well-known Liability Side...

In auctions where bidders are uncertain of their value and are fully liable for their bids, there exists the potential for losses if bids exceed realized values. Theoretically, bids will be higher if bidders are able to mitigate this downside loss through some form of limited liability. To...

We present the results of an economic laboratory experiment that tests behavioral biases that have been associated with the BDM mechanism. By manipulating the highest random competing bid, the maximum possible loss, the distribution of prices and the elicitation format, we attempt to disentangle...

This study examines consumer preferences for organic and local apples by combining between- and within-subject design characteristics in a second price auction. We first ask subjects to bid for 1 Kg of apples without any information. In subsequent rounds we reveal information about the organic...