Articles - Dodonova

6 important questions on Articles - Dodonova

Describe the regret theory

people who made certain decisions in the past may have regrets if these decisions turn out to be wrong even if they appeared correct with the information available.

Describe loser regret

a bidder in first-price sealed-bid auction who values object at 1,000 and bids only 500 feels regret when she learns winning bid was only 501. This makes bidders bid more aggressively.

Describe winner regret

same bidder who bids 500 feels regret for “money left on the table” if she wins and learns the other highest bid was 100. This makes bidders shade their bids in first-price sealedauctions.
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Are bidders in descending dutch auctions subject to winners and loser regret?

Bidders in descending Dutch auctions are subject to loser regret, but are free from winner regret, because the second largest bid doesn’t exist and the winner never finds out the price at which she could have won.

Describe if the third hypothesis in dodonova is confirmed? (The sellers’ revealed valuation of the object will be higher than the average revealed bidders’ valuation.)

Sellers are prone to the endowment effect. Therefore, the seller’s revealed evaluation of the object is expected to be higher than the average revealed bidder’s valuation.

Hypothesis 3 is confirmed: The sellers’ revealed valuation of the object did prove to be higher than the average revealed bidders’ valuation.

Which bias could be relevant in each of the auction formats? Use your answer to derive the three hypotheses.

In a Dutch auction loser regret increases bids, winner regret is absent.  In a first price sealed bid auction anticipated winner regret lowers the bids, while loser regret increases bids.

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