There is a debate about whether risk aversion is the main source of overbidding in a first-price independent private values auction. As an alternative, we adopt a non-expected utility framework, and identify an interpretable property on the probability weighting function which always induces overbidding.
probability weighting function; auctions; overbidding; non-expected utility; risk aversion;
- C70: General
- C92: Laboratory, Group Behavior
- D44: Auctions
- D81: Criteria for Decision-Making under Risk and Uncertainty
TSE Working Paper, n. 09-024, March 2009