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