We run experiments of first-price auctions with two groups, by which we directly detect the presence of bidders’ loss-aversion. Each human bidder bids against three preprogrammed computer bidders. The computer bidders independently draw their values from the uniform distribution and bid their...

We introduce a theoretical model of executives with insider information who receive executive stock options (ESOs) as incentives and optimize their “outside wealth” portfolios. We show that insider information nullifies ESO incentivizing, misaligning executives' and shareholders' interests....

Auctions often involve goods exhibiting a common knowledge ex-post risk. Precautionary bidding predicts that under expected utility, ex-post risk leads DARA bidders to reduce their bids by more than the appropriate risk premium. Because the degree of riskiness of the good, and bidders risk...