Bidder Behavior in Sealed Bid Auctions Where the Number of Bidders is Unknown

This paper analyzes individual bidding data from a series of sealed-bid auctions in which bidders do not known how many bidders they are bidding against. Unlike previous studies of sealed bid second price auctions with known number of bidders, we find a surprising amount of coincidence with theory. We observe systematic deviations from risk neutral bidding in first price auctions and show that these deviations are consistent with risk averse preferences. We find essentially no heterogeneity in bidding in the second price auctions, where risk preferences and the number of bidders do not affect the optimal bid. In the first price auctions heterogeneity in bidding persist and increases with experience and is consistent with heterogeneity in risk preferences, the attempt to count the number of bidders in the auction, and bidder specific noise. (JEL D44, C91) ∗ Isaac and Pevnitskaya: Florida State University, Tallahassee, FL, 32306-2180, [email protected] and [email protected]; Schnier: University of Rhode Island, Kingston RI 02881, [email protected]. We thank the Quinn Eminent Scholar Chair at Florida State and the Agricultural Experiment Station at The University of Rhode Island for funding.