Welcome to the new version of CaltechAUTHORS. Login is currently restricted to library staff. If you notice any issues, please email coda@library.caltech.edu
Published August 10, 2017 | Submitted
Report Open

Quantal Response Equilibrium and Overbidding in Private-Value Auctions


This paper reports the results of a private-values auction experiment in which expected costs of deviating from the Nash equilibrium bidding function are asymmetric, with the implication that upward deviations will be more likely in one treatment than in the other. Overbidding is observed in both treatments, but is more prevalent in the treatment where the costs of overbidding are lower. We specify and estimate a noisy (quantal response) model of equilibrium behavior. Estimated noise and risk aversion parameters are highly significant and consistent across treatments. The resulting two-parameter model tracks both the average bids and the distribution of bids remarkably well. Alternative explanations of overbidding are also considered. The estimates of parameters from a nonlinear probability weighting function yield a formulation that is essentially equivalent to risk aversion in this context. A model in which players experience a "joy of winning" provides a reasonable fit of the data but does significantly worse than the risk aversion model.

Additional Information

This research was funded in part by the National Science Foundation (SBR-9818683 and SBR-9631627). Published as Goeree, J.K., Holt, C.A., & Palfrey, T.R. (2002). Quantal response equilibrium and overbidding in private-value auctions. Journal of Economic Theory, 104(1), 247-272.

Attached Files

Submitted - sswp1073.pdf


Files (254.8 kB)
Name Size Download all
254.8 kB Preview Download

Additional details

August 19, 2023
January 13, 2024