Robust Bidding in First-Price Auctions: How to Bid without Knowing what Otheres are Doing

Bernhard Kasberger, Karl Schlag

Bidding optimally in first-price auctions is complicated. In the classical equilibrium framework, optimal bidding relies on detailed beliefs about
other bidders’ value distributions and bidding functions. This article shows how to find a robust bidding rule that does well with minimal information and thus achieves good performance in many situations. Robust bidding means to minimize the maximal difference between the payoff and the pay-off that could be achieved if one knew the other bidders’ value distributions and bidding functions. We derive robust bidding rules under different scenarios, including complete uncertainty. Our bid recommendations are evaluated with experimental data.

Department of Economics
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Publication date
Austrian Fields of Science 2012
502021 Microeconomics
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