Interdependent‐value auctions with spiteful bidders

I study the interaction between spiteful preferences and interdependent values in auctions. While spite causes overbidding in both auction formats, interdependent values affect spiteful bidders' incentives differently depending on the auction format. Relative to independent values, bidders with interdependent values are less affected by spite in first‐price auctions, but more affected in second‐price auctions: the decrease in bid shading is smaller in the former, while the increase in above‐value bidding is greater in the latter. This format‐dependent behaviour reflects the trade‐off between increased competitiveness driven by spite and caution induced by the winner's curse.