Learning Through Simultaneous Play: Evidence from Penny Auctions

20 Pages Posted: 9 Nov 2016

See all articles by Ricardo Gonçalves

Ricardo Gonçalves

Universidade Católica Portuguesa - Faculdade de Economia e Gestão

Miguel Alexandre Fonseca

University of Exeter Business School; University of Minho - Economic Policies Research Unit (NIPE)

Date Written: Winter 2016

Abstract

This paper contributes to the emerging empirical literature on penny auctions, a particular type of all‐pay auctions. We focus on the potential learning effects that bidders may experience over time but also (and particularly) across auctions as a result of their auction participation. Using detailed bid‐level information, we find that, similarly to earlier literature, bidders suffer from a sunk cost fallacy, whereby their probability of dropping out of an auction is decreasing in the number of bids they have already placed in that auction. Although we do find that learning through repeated participation alleviates the sunk cost fallacy, participation in simultaneous penny auctions emerges as a much more effective learning mechanism, ultimately contributing toward bidders earning higher individual surpluses.

Suggested Citation

Gonçalves, Ricardo and Fonseca, Miguel Alexandre, Learning Through Simultaneous Play: Evidence from Penny Auctions (Winter 2016). Journal of Economics & Management Strategy, Vol. 25, Issue 4, pp. 1040-1059, 2016, Available at SSRN: https://ssrn.com/abstract=2866737 or http://dx.doi.org/10.1111/jems.12174

Ricardo Gonçalves (Contact Author)

Universidade Católica Portuguesa - Faculdade de Economia e Gestão ( email )

Palma de Cima
P-1649-023 Lisbon, Porto 4169-005
Portugal
+ 351 22 6196200 (Phone)

HOME PAGE: http://www.porto.ucp.pt

Miguel Alexandre Fonseca

University of Exeter Business School ( email )

Streatham Court
Xfi Building, Rennes Dr.
Exeter, EX4 4JH
United Kingdom

University of Minho - Economic Policies Research Unit (NIPE) ( email )

Campus de Gualtar
Braga, 4710-057
Portugal

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
1
Abstract Views
135
PlumX Metrics