2387. No commitment, no problem?
Invited abstract in session TC-8: Strategic Behavior in Modern Markets, stream Game Theory and Behavioral Management Science.
Thursday, 11:45-13:15Room: H8
Authors (first author is the speaker)
| 1. | Philippe Gillen
|
| CBS international Business School |
Abstract
Consider a first-price procurement auction in which the buyer lacks the commitment not to renegotiate with the winning seller upon con clusion of the auction. The theoretical prediction for such a setting is stark: only pooling equilibria exist in which bids are both high and uninformative to the buyer. The buyer responds by selecting a win ning seller, and making them a take-it-or-leave-it offer. This leads to higher buyer expenses than in a setting with commitment. Of course, this equilibrium requires a high degree of sophistication on the part of the sellers. We therefore take this setting to the laboratory. While we find that sellers bid significantly higher in the no-commitment set ting vis-`a-vis the setting with commitment, buyer expenses are actu ally significantly lower in the no-commitment setting. This finding holds even when providing buyer and sellers with decision support. It also holds when letting artificial intelligence partake in these auctions. These findings moderate the theoretical prediction, suggesting that, at least at this moment in time, a lack of commitment may actually be beneficial to the buyer.
Keywords
- Game Theory
- Auctions / Competitive Bidding
Status: accepted
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