Behavioral models for first-price sealed-bid auctions with the one-shot decision theory

We build an auction model with the one-shot decision theory which describes the process of a bidder deciding his/her bidding price in first-price sealed-bid auctions. The decision making procedure involves two steps: First, for each of his/her possible bidding prices, the bidder examines every possible highest bidding price provided by the other bidders and chooses one as a focus point of this bidding price of him/her. Then, the bidder determines such a bidding price as the optimal one that generates the best outcome when its focus point occurs. The optimal bidding price can be obtained and two common phenomena in auction markets: throwing away and overbidding are well explained. (C) 2017 Elsevier B.V. All rights reserved.