COMPETITION AND BIDDING BEHAVIOR: SOME EVIDENCE FROM THE RICE MARKET

When objects have uncertain value, the net effect of competition in sealed-bid auctions is ambiguous. The risk of succumbing to the "winner's curse" generally causes bidders to exhibit a non-aggressive response in addition to the standard competitive effect. Sellers can influence the size of the nonaggressive effect by responding to the value uncertainty. This paper focuses specifically on individual bidding behavior in a rice auction market in which sellers issue a product-quality guarantee. The empirical evidence supports my hypothesis that such a guarantee negates the significance of the nonaggressive bidder response.