Cross-game learning and cognitive ability in auctions

Author(s)
Martin Kocher, Thomas Giebe, Radosveta Ivanova Stenzel, Simeon Schudy
Abstract

Overbidding in sealed-bid second-price auctions (SPAs) has been shown to be per
sistent and associated with cognitive ability. We study experimentally to what extent
cross-game learning can reduce overbidding in SPAs, taking into account cognitive
skills. Employing an order-balanced design, we use first-price auctions (FPAs) to
expose participants to an auction format in which losses from high bids are more
salient than in SPAs. Experience in FPAs causes substantial cross-game learning for
cognitively less able participants but does not affect overbidding for the cognitively
more able. Vice versa, experiencing SPAs before bidding in an FPA does not sub
stantially affect bidding behavior by the cognitively less able but, somewhat surpris
ingly, reduces bid shading by cognitively more able participants, resulting in lower
profits in FPAs. Thus, ‘cross-game learning’ may rather be understood as ‘cross
game transfer’, as it has the potential to benefit bidders with lower cognitive ability
whereas it has little or even adverse effects for higher-ability bidders.

Organisation(s)
Department of Economics, Vienna Center for Experimental Economics
External organisation(s)
Linnaeus University, Technische Universität Berlin, Ludwig-Maximilians-Universität München
Journal
Experimental Economics
Volume
27
Pages
80-108
No. of pages
29
ISSN
1386-4157
DOI
https://doi.org/10.1007/s10683-023-09789-8
Publication date
03-2024
Peer reviewed
Yes
Austrian Fields of Science 2012
502057 Experimental economics
Keywords
ASJC Scopus subject areas
Economics, Econometrics and Finance (miscellaneous)
Portal url
https://ucrisportal.univie.ac.at/en/publications/b9a09acb-63c7-472d-82e6-c7da0a21c977