Motivated Beliefs in Auctions

Persuasion With Motivated Beliefs

Considerable empirical research finds that people derive utility not only from consumption, but also from their beliefs about themselves and the world. Rather than dispassionately updating their views in response to new information, such belief-based utility implies that people at times avoid information and use other strategies to protect their existing beliefs. We present a two-stage model of...

The Economics of Motivated Beliefs

Leveraging Possibilistic Beliefs in Unrestricted Combinatorial Auctions

In unrestricted combinatorial auctions, we put forward a mechanism that guarantees a meaningful revenue benchmark based on the possibilistic beliefs that the players have about each other’s valuations. In essence, the mechanism guarantees, within a factor of two, the maximum revenue that the “best informed player” would be sure to obtain if he/she were to sell the goods to his/her opponents via...

Asymmetric demand information in uniform and discriminatory call auctions: an experimental analysis motivated by electricity markets

We study the outcomes of experimental multi-unit uniform and discriminatory auctions with demand uncertainty. Our study is motivated by the ongoing debate about market design in the electricity industry. Our main aim is to compare the effect of asymmetric demand-information between sellers on the performance of the two auction institutions. In our baseline conditions all sellers have the same i...

Challenges to a Policy Treatment of Speculative Trading Motivated by Differences in Beliefs

This paper discusses some of the challenges faced by a policy treatment of speculative trading that is motivated by differences in beliefs. The first challenge is philosophical. Suppose two investors prefer to speculate with each other, under the common knowledge that they are motivated to trade purely by a difference in beliefs (unconditional probability assessments). In the absence of third-p...