Int J Game Theory (2002) 31:69–89 On the impact of low-balling: Experimental results in asymmetric auctions Paul Pezanis-Christou* Institut d’Ana `lisi Econo ` mica, CSIC, Campus Universitat Auto ` noma de Barcelona, 08193 Bellaterra, Barcelona (email: ppc@iae.csic.es) Received: January 1999/Final version June 2001 Abstract. The paper reports on a series of asymmetric auction experiments with private-independent values and two buyers. Maskin and Riley (2000) showed, under some conditions, that if one buyer has a greater probability than the other of not being able to bid, first-price auctions could yield lower revenues to the seller than second-price auctions. The data rejected this prediction be- cause of an important overbidding when subjects received low values in first- price auctions. In this asymmetric setting, the observed overbidding cannot be explained by the usual risk aversion hypothesis and the detection of a learning pattern indicates that subjects used more an adaptive behaviour than a static one. An ad hoc bidding strategy for the buyers who are the most likely to bid explains the observed low bids better than the risk neutral equilibrium strategy. Finally, as subjects appear to have bid in equilibrium as if there were two other competitors instead of only one, their bidding behaviour can be thought to have displayed an over anxiousness about winning. Key words: Auctions, Asymmetric Buyers, Private-Independent Values, Exper- imental Economics * I thank Klaus Abbink, Ron Harstad, John Kagel, Dan Levin, Abdolkarim Sadrieh, Reinhard Selten, Graham Voss, two anonymous referees and seminar participants at the 1996 ESA Con- ference in Tucson, the 1997 Econometric Society Meetings in New-Orleans, GREQAM (Mar- seille), Center for Economic Research (Tilburg) and the University of Bonn for helpful comments. I am also grateful to John Riley and Huagang Li for providing me with their BIDCOMP 2 software and to Alan Kirman, my thesis advisor, and Louis Phlips for their guidance. This paper supersedes an earlier version which was printed in the European University Institute Working Paper Series (#95/1). Support from the European University Institute, the Deutsche Forschungsgemeinschaft through SFB 303 and the University of New South Wales is gratefully acknowledged. Remaining errors are my own responsability.