decreasing bidders' risk significantly reduces the degree of overbidding relative to the risk-neutral Bayesian-Nash equilibrium …-standing debate on the e?ect of risk on auction behavior, our results give rise to a new puzzle. As risk is diminished and overbidding …We introduce a new method of varying the risk that bidders face in first-price private value auctions. 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 predicts underbidding if valuations are low. We test this model with …

We present results from a series of experiments that allow us to measure overbidding and, in particular, underbidding …

We analyse bidding behaviour in auctions when risk-averse buyers bid for a good whose value is risky. We show that when … risk in the valuations increases, DARA bidders will reduce their bids by more than the appropriate increase in the risk … marginal utility of income increases with risk, so buyers are reluctant to bid so highly. We also show that precautionary …

as predicted by the risk neutral Nash equilibrium. Consequently, bids are more likely to be above [below] the equilibrium …

, and higher biddersʼ payoffs. Under risk neutrality, the members of the strong party benefit less than the weak bidders …. The prediction is reversed when the bidders are sufficiently risk-averse. These hypotheses are tested experimentally …–group differences based on differences in risk attitudes is not supported by the data. …