# “Likelihood of Winning and
Overbidding in First-Price Auctions”

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## Paolo Crosetto, Antonio Filippin and
Peter Katuščák

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## Abstract

We
study bidding in first-price sealed-bid auctions with independent private
values. We use a one-shot experiment in which a single human bidder bids
against a single computerized bidder whose bids are drawn from a uniform
distribution. Across our two main treatments, the value of the human bidders is
fixed, while we change the upper boundary of the set of computerized bids. We
find that humans' bids are higher when the boundary of the opponent is also
higher. Such evidence is inconsistent with bidding based on objective functions
that are linear in the probability of winning given one's
bid. This is the case of expected utility, anticipated regret, and utility of
winning that is affine in value. According to such theories, rescaling the
probability of winning should not affect the optimal choice. This finding
suggests that an alternative theory of decision-making, such as prospect
theory, is necessary to account for bidding in first-price auctions in general.

**Keywords:** auctions, bidding, overbidding.