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The B.E. Journal of Economic Analysis & Policy

Editor-in-Chief: Jürges, Hendrik / Ludwig, Sandra

Ed. by Auriol , Emmanuelle / Brunner, Johann / Fleck, Robert / Friebel, Guido / Mendola, Mariapia / Requate, Till / Tsui, Kevin / Wichardt, Philipp / Zulehner, Christine

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The Spite Motive and Equilibrium Behavior in Auctions

John Morgan1 / Ken Steiglitz2 / George Reis3

1University of California, Berkeley,

2Princeton University,

3Princeton University,

Citation Information: Contributions in Economic Analysis & Policy. Volume 2, Issue 1, ISSN (Online) 1538-0645, DOI: 10.2202/1538-0645.1102, April 2003

Publication History

Published Online:
2003-04-14

Abstract

We study auctions where bidders have independent private values but attach a disutility to the surplus of rivals, and derive symmetric equilibria for first-price, second-price, English, and Dutch auctions. We find that equilibrium bidding is more aggressive than standard predictions. Indeed, in second-price auctions it is optimal to bid above one's valuation; that is, bidding "frenzies" can arise in equilibrium. Further, revenue equivalence between second-price and first-price auctions breaks down, with second-price outperforming first-price. We also find that strategic equivalence between second-price and English auctions no longer holds, although they remain revenue equivalent. We conclude that spiteful bidding rationalizes anomalies observed in laboratory experiments across the four auction forms better than the leading alternatives.

Keywords: auctions; spite; behavior

Citing Articles

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[1]
Matthew Pearson and Burkhard C. Schipper
Games and Economic Behavior, 2013, Volume 78, Page 1
[2]
Emiko Fukuda, Yoshio Kamijo, Ai Takeuchi, Michiharu Masui, and Yukihiko Funaki
The RAND Journal of Economics, 2013, Volume 44, Number 3, Page 438
[3]
Martin Bichler, Pasha Shabalin, and Jürgen Wolf
Experimental Economics, 2013, Volume 16, Number 4, Page 511
[4]
David J. Cooper and Hanming Fang
The Economic Journal, 2008, Volume 118, Number 532, Page 1572
[5]
Maxim Engers and Brian McManus
International Economic Review, 2007, Volume 48, Number 3, Page 953

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