Impacts of Behavioral Preferences in Experimental Auctions
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2024-12-13
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9
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1
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This paper investigates how individual behavioral preferences—cognitive abilities, risk preferences, time preferences, regret, and competitiveness—relate to economic decision-making in experimental auctions and may help explain the adoption of the unusual Honolulu auction. Two auction formats, the traditional Dutch auctions, and the unique Honolulu auction format, are investigated in the laboratory. College students participated as bidders in these experiments and were incentivized with cash as according to experimental economics methodology. We correlate their behavioral preferences with bidder profits in the experimental auctions. Our findings reveal participants with higher cognitive abilities have higher earnings in Dutch auctions but not Honolulu auctions. Nevertheless, participants make more in Honolulu auctions than in Dutch auctions. This suggests individuals may still maximize their payoffs regardless of cognitive skill in Honolulu auctions. Further analysis of post auction feedback reveals an aversion to regret, specifically loser’s regret, may be a behavioral reason for the adoption of the Honolulu format. Additionally, we contribute to existing literature of using validated non-incentivized measurements to elicit behavioral features as compared to traditional incentivized measures in economics.
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