Abstract
Our study compares individual and team bidding in standard auction formats: first-price, second-price and ascending-price (English) auctions with independent private values. In a laboratory experiment, we find that individuals overbid more than teams in first-price auctions and deviate more from bidding their own value in second-price auctions. However, we observe no difference in bidding behavior in English auctions. Based on control variables, we provide evidence that the observed difference could be explained by better reasoning abilities of teams. Emotions seem to play a role in determining bids, but the effect of emotions on bidding does not differ between individuals and teams.
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Notes
They might have heterogeneous risk attitudes, though, that create a conflict when coming up with a joint bid in some auction formats.
See, for instance, Breaban and Noussair (2018) for an application of emotion measurement in experimental asset markets.
The members of the same team in TEAM treatments had the same values for the good so that teams had exactly the same information as individual bidders in IND treatments.
We conducted a different number of auctions in FPA and EA treatments merely due to time considerations. English auctions on average took longer than first-price auctions.
All our results hold qualitatively if you use profit/valuation, that is, relative profits as the dependent variable. The corresponding table can be found in an Online Appendix.
In fact, this difference was purely due to a higher number of teams that chose to invest zero points into the risky asset. We assumed \(r=1\) for those who did so, creating discontinuity in the parameter. Four out of 30 teams invested nothing in this task, compared to one out of 36 individuals. If we exclude these observations, the difference in risk preferences vanishes.
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Financial support by Deutsche Forschungsgemeinschaft through CRC TRR 190 (project number 280092119) is gratefully acknowledged. We are grateful to Fangfang Tan for very helpful comments and to two anonymous referees and the editor whose suggestions improved the paper a lot. The replication material for the study is available at: https://doi.org/10.5281/zenodo.6946038.
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Karmeliuk, M., Kocher, M.G. & Schmidt, G. Teams and individuals in standard auction formats: decisions and emotions. Exp Econ 25, 1327–1348 (2022). https://doi.org/10.1007/s10683-022-09769-4
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DOI: https://doi.org/10.1007/s10683-022-09769-4