Bids in private value first price auctions consistently deviate from risk neutral symmetric equilibrium bids. It is difficult to explain this deviation with risk aversion. We propose and test two other explanations: (1) Bidders do not form correct expectations. (2) Bidders do not play a best...

We present the first laboratory study showing that concerns for social welfare are key determinants of investment behavior in a world of incomplete contracting. Two equally productive players simultaneously decide how much to invest into a joint production process. The total monetary benefit...

In this paper we derive equilibrium bidding functions for first-price and second-price auctions with private values when bidders have outside options. We then study bidding behaviour with the help of experiments. We find that bidders respond to outside options and to variations of common...

We generate observable expectations about fiscal variables through laboratory experiments using real world data from several European countries as stimuli. We compare a VAR model of expectations for data which is presented in a fiscal frame with one for neutrally presented data. We find that...

First-price auction experiments find often substantial overbidding which is typically related to risk aversion. We introduce a model where some bidders use constrained linear bids. As with risk aversion this leads to overbidding if valuations are high, but in contrast to risk aversion the model...

The paper compares with the help of experiments dynamic and static wars of attrition (i.e. second price all-pay auctions) and first-price all-pay auctions. While most experimental studies find overbidding in first-price all-pay auctions, we find underbidding in a similar institution, the war of...