Gender Plays Role in Auctions, Study Shows
April 10, 2012 - News Release
Imagine bidding on a jar of coins at an auction without knowing the number of coins or their total value. You can guess how many coins the jar contains, but you will know the jar’s real worth only after you win.
Will the winning bid be higher than the actual value, so that the winning bidder loses money? Will the winning bidder more likely be a man or a woman? Who is more likely to bid too much?
A recent study by Prof. Johanna Goertz in the University of Guelph’s Department of Economics looked at the behaviour of novice and experienced bidders in this type of auction, called a common-value auction.
In a common-value auction, such as a mineral lease auction, some information about the item’s value is provided to bidders. The item is worth the same monetary value to every participant, but no bidder knows what that value is.
One auction experiment pitted only first-time bidders against each other. Other experiments involved only experienced bidders, or a mixed market of novices and experienced bidders. The 90 participants — Ohio State University undergraduates participating in the auctions on laboratory computers — knew they were vying against bidders with varied experience and were shown the results of each auction.
Goertz wanted to learn whether market composition affected bidding behaviour. The results were surprising: various markets prompted different behaviour from males and females, and from experienced and novice bidders.
“Very different adaptation behaviour of inexperienced males and females emerged,” Goertz said. “Inexperienced males bid more aggressively in the mixed markets than in the all-inexperienced markets, while inexperienced females bid more aggressively in the all-inexperienced markets than in the mixed markets. This was not expected at all.”
Although inexperienced women performed less well overall than inexperienced men in the all-novice market, this difference disappeared in the mixed market.
Experienced bidders performed better than novice bidders; whether the market was mixed or all-experienced made no difference to them.
“It seems that mixed markets help inexperienced women but hurt inexperienced men,” Goertz said. She is interested in finding out why.
“Some studies have found that, in general, males tend to be overconfident and more competitive than women in such competitive economic environments. Perhaps women benefit by observing their experienced opponents in the mixed markets and learning from them, whereas when males are aware that their opponents are experienced bidders, it inspires a rather competitive spirit that, in turn, causes them to overbid more frequently. These outcomes open up new research directions.”
Goertz conjectures that research along these lines may help us better understand how people learn and adapt their behaviour over time.
“Ultimately, further study could possibly lead us to discover what mechanisms can help people avoid going bankrupt in these kinds of environments,” she said.
The study is available online.
Contact:
Johanna Goertz
College of Management and Economics
University of Guelph
519-824-4120, Ext. 53273
jgoertz@uoguelph.ca
For media questions, contact Communications and Public Affairs: Lori Bona Hunt, 519-824-4120, Ext. 53338, or lhunt@uoguelph.ca, or Shiona Mackenzie, Ext. 56982, or shiona@uoguelph.ca.
