The Effect of Information Feedback on Bidding Behavior: Experimental Study on Regret Theory in Auctions

Masao Nagatsuka^1,

¹Department of Economics, Tezukayama University, Nara, Japan

Cite this paper:
Masao Nagatsuka. The Effect of Information Feedback on Bidding Behavior: Experimental Study on Regret Theory in Auctions. Journal of Behavioural Economics, Finance, Entrepreneurship, Accounting and Transport. 2016; 4(2):18-23. doi: 10.12691/jbe-4-2-1

Abstract

The present study investigates whether information feedback affects bidding behavior in first price auctions. Feedback differences significantly affect bidding in the literature. As a possible explanation, preceding study built regret anticipation model and shown that information feedback on the loser can be a driving force for overbidding relative to risk neutral Nash equilibrium predictions. However, the question if actual regret experience affects bidding remains unanswered. Furthermore, whether an opportunity for regret distort posterior decision is unanswered. Therefore, an experiment was conducted to test whether actual regretful feedback causes overbidding by using a repeated design experiment. Experimental results indicate that feedback information on bidding results does not cause significant overbidding in the first round, but loser regret sensitive bidders tend to overbid in the next round.

Keywords:
first price auctions overbidding regret information feedback within subject design

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