Understanding Overbidding In Second Price Auctions: An Experimental Study
This paper presents results from a series of Second Price Private value Auction (SPA) experiments in which bidders are either given for free, or are allowed to purchase, noisy signals about their opponents' value. Even though theoretically such information about opponents' value has no strategetic use in the SPA, it provides the authors with a convenient instrument to change bidders' perception about the "Strength" (i.e. the value) of their opponent. They argue that the empirical relationship between the incidence and magnitude of overbidding and bidders' perception of the strength of their opponent provides the key to understand whether overbidding in second price auctions are driven by "Spite" motives or by the "Joy of winning."