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The full-text may be used and/or reproduced, and given to third parties in any format or medium, without prior permission or charge, for personal research or study, educational, or not-for-prot purposes provided that:• a full bibliographic reference is made to the original source • a link is made to the metadata record in DRO • the full-text is not changed in any way The full-text must not be sold in any format or medium without the formal permission of the copyright holders. AbstractIn reverse auctions, buyers often retain the right to bargain further concessions from the winners. The optimal form of such procurement is an English auction followed by an auctioneer's option to engage in ultimatum bargaining with the winners. We study behavior and performance in this procurement format using a laboratory experiment. Sellers closely follow the equilibrium strategy of exiting the auction at their costs and then accepting strictly profitable offers. Buyers generally exercise their option to bargain according to their equilibrium strategy, but their take-it-or-leave-it offers vary positively with auction prices when they should be invariant. We explain this deviation by modeling buyers' subjective posteriors regarding the winners' costs as distortions of the Bayesian posteriors, calculated using a formulation similar to a commonly used probability weighting function. We further test the robustness of the experimental results and the subjective posterior explanation with three additional experimental treatments.JEL classifications: C34; C92; D03; D44

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We experimentally investigate the evolution play in an infinitely repeated voluntary contribution mechanism (VCM). We find that in infinitely repeated VCM games: (i) average contributions in the first round are similar to those of finitely repeated VCM games; (ii) most groups have a non‐monotonic trend of contribution with repetition; and (iii) contributions remain at the same level after an unexpected restart. The data provides strong support for heterogeneous subjects, which may explain the non‐monotonic trend of average contributions. This trend is caused by one category of subjects who expect others to contribute in period t as they did in period t − 1.