Brennan C. Platt

The Role of Risk Preferences in Pay-to-Bid Auctions

We analyze a new auction format in which bidders pay a fee each time they increase the auction price. Bidding fees are the primary source of revenue for the seller but produce the same expected revenue as standard auctions (assuming risk-neutral bidders). If risk-loving preferences are incorporated in the model, expected revenue increases. Our model predicts a particular distribution of ending prices, which we test against observed auction data. The degree of fit depends on how unobserved parameters are chosen; in particular, a slight preference for risk has the biggest impact in explaining auction behavior, suggesting that pay-to-bid auctions are a mild form of gambling. This paper was accepted by Peter Wakker, decision analysis.

Sticking with what (barely) worked: : A test of outcome bias

Outcome bias occurs when an evaluator considers ex post outcomes when judging whether a choice was correct ex ante. We formalize this cognitive bias in a simple model of distorted Bayesian updating. We then examine strategy changes made by professional basketball coaches. We find that they are more likely to revise their strategy after a loss than a win—even for narrow losses, which are uninformative about team effectiveness. This increased strategy revision following a loss occurs even when a loss was expected and even when failure is due to factors beyond the teams control. These results are consistent with our models predictions. Data, as supplemental material, are available at http://dx.doi.org/10.1287/mnsc.2014.1966. This paper was accepted by Yuval Rottenstreich, judgment and decision making.

Sticking with What (Barely) Worked

Outcome bias occurs when an evaluator considers ex-post outcomes when judging whether a choice was correct, ex-ante. We formalize this cognitive bias in a simple model of distorted Bayesian updating. We then examine strategy changes made by professional football coaches. We find they are more likely to revise their strategy after a loss than a win -- even for narrow losses, which are uninformative about future success. This increased revision following a loss occurs even when a loss was expected, and the offensive strategy is revised even when failure is attributable to the defense. These results are consistent with our models predictions.

Spoilers, blocking coalitions, and the core

This paper surveys non-cooperative implementations of the core which tell an intuitive story of coalition formation. Under the core solution concept, if a blocking coalition exists those agents abandon the current allocation without regard for the consequences to players outside the blocking coalition. Yet in certain circumstances, these players have an incentive to prevent formation of any blocking coalition; a game analyzed in Lagunoff (Games Econ Behav 7:54–61, 1994) is vulnerable to such circumstances. To obtain all core allocations and only core allocations, a mechanism must either restrict the actions of non-members of a proposed coalition, or ensure that non-members are unharmed by the departure of the coalition. These requirements illustrate the core’s nonchalance toward agents not in blocking coalitions.