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The chopstick auction: A study of the exposure problem in multi-unit auctions

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Author Info
Englmaier, Florian
Guillén, Pablo
Llorente, Loreto
Onderstal, Sander
Sausgruber, Rupert

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Abstract

Multi-unit auctions are sometimes plagued by the so-called exposure problem. In this paper, we analyze a simple game called the "chopstick auction" in which bidders are confronted with the exposure problem. We do so both in theory and in a laboratory experiment. In theory, the chopstick auction has an efficient equilibrium and is revenue equivalent with the second-price sealed-bid auction in which the exposure problem is not present. In the experiment, however, we find that the chopstick auction is less efficient than the second-price sealed-bid auction and that it yields more [the same] revenue if bidders are inexperienced [experienced].

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Publisher Info
Article provided by Elsevier in its journal International Journal of Industrial Organization.

Volume (Year): 27 (2009)
Issue (Month): 2 (March)
Pages: 286-291
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Handle: RePEc:eee:indorg:v:27:y:2009:i:2:p:286-291

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Web page: http://www.elsevier.com/locate/inca/505551

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Related research
Keywords: Chopstick auction Exposure problem Laboratory experiment Second-price sealed-bid auction;

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Noussair, Charles & Silver, Jonathon, 2006. "Behavior in all-pay auctions with incomplete information," Games and Economic Behavior, Elsevier, vol. 55(1), pages 189-206, April. [Downloadable!] (restricted)
  2. Yasar Barut & Dan Kovenock & Charles Noussair, 1999. "A Comparison of Multiple-Unit All-Pay and Winner-Pay Auctions Under Incomplete Information," CIG Working Papers FS IV 99-09, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG). [Downloadable!]
    Other versions:
  3. Cramton, Peter C, 1995. "Money Out of Thin Air: The Nationwide Narrowband PCS Auction," Journal of Economics & Management Strategy, Blackwell Publishing, vol. 4(2), pages 267-343, Summer.
    Other versions:
  4. van Damme, Eric, 2002. "The European UMTS-auctions," European Economic Review, Elsevier, vol. 46(4-5), pages 846-858, May. [Downloadable!] (restricted)
  5. Paul R. Milgrom, 1985. "Auction Theory," Cowles Foundation Discussion Papers 779, Cowles Foundation, Yale University. [Downloadable!]
  6. Tilman Börgers & Christian Dustmann, 2005. "Strange Bids: Bidding Behaviour in the United Kingdom's Third Generation Spectrum Auction," Economic Journal, Royal Economic Society, vol. 115(505), pages 551-578, 07. [Downloadable!] (restricted)
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  7. Lawrence M. Ausubel & Peter Cramton, 1998. "The Optimality of Being Efficient," Papers of Peter Cramton 98wpoe, University of Maryland, Department of Economics - Peter Cramton, revised 18 Jun 1999. [Downloadable!]
  8. Szentes, Balazs & Rosenthal, Robert W., 2003. "Three-object two-bidder simultaneous auctions: chopsticks and tetrahedra," Games and Economic Behavior, Elsevier, vol. 44(1), pages 114-133, July. [Downloadable!] (restricted)
  9. Jan Potters & Casper G. de Vries & Frans van Winden, 1998. "An Experimental Examination of Rational Rent-Seeking," Tinbergen Institute Discussion Papers 98-068/1, Tinbergen Institute.
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  10. Jeremy Bulow & Ming Huang & Paul Klemperer, 1999. "Toeholds and Takeovers," Journal of Political Economy, University of Chicago Press, vol. 107(3), pages 427-454, June. [Downloadable!] (restricted)
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  11. Onderstal, S., 2002. "The chopstick auction," Discussion Paper 35, Tilburg University, Center for Economic Research. [Downloadable!]
  12. Bykowsky, Mark M & Cull, Robert J & Ledyard, John O, 2000. "Mutually Destructive Bidding: The FCC Auction Design Problem," Journal of Regulatory Economics, Springer, vol. 17(3), pages 205-28, May. [Downloadable!] (restricted)
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  13. Damme, E. van, 2002. "The European UMTS-auctions," Discussion Paper 100, Tilburg University, Center for Economic Research. [Downloadable!]
  14. McMillan, John, 1994. "Selling Spectrum Rights," Journal of Economic Perspectives, American Economic Association, vol. 8(3), pages 145-62, Summer. [Downloadable!] (restricted)
  15. Ronald Harstad, 2000. "Dominant Strategy Adoption and Bidders' Experience with Pricing Rules," Experimental Economics, Springer, vol. 3(3), pages 261-280, December. [Downloadable!] (restricted)
  16. Rosenthal, Robert W. & Wang, Ruqu, 1996. "Simultaneous Auctions with Synergies and Common Values," Games and Economic Behavior, Elsevier, vol. 17(1), pages 32-55, November. [Downloadable!] (restricted)
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  17. Davis, Douglas D & Reilly, Robert J, 1998. " Do Too Many Cooks Always Spoil the Stew? An Experimental Analysis of Rent-Seeking and the Role of a Strategic Buyer," Public Choice, Springer, vol. 95(1-2), pages 89-115, April. [Downloadable!] (restricted)
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  18. McAfee, R Preston & McMillan, John, 1996. "Analyzing the Airwaves Auction," Journal of Economic Perspectives, American Economic Association, vol. 10(1), pages 159-75, Winter. [Downloadable!] (restricted)
  19. Kagel, John H & Harstad, Ronald M & Levin, Dan, 1987. "Information Impact and Allocation Rules in Auctions with Affiliated Private Values: A Laboratory Study," Econometrica, Econometric Society, vol. 55(6), pages 1275-1304, November. [Downloadable!] (restricted)
  20. Paul Klemperer, 2002. "What Really Matters in Auction Design," Journal of Economic Perspectives, American Economic Association, vol. 16(1), pages 169-189, Winter. [Downloadable!] (restricted)
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  21. Kagel, J.H. & Levin, D., 1988. "Independent Private Value Auctions: Bidder Behavior In First, Second And Third-Price Auctions With Varying Numbers Of Bidders," Papers 13, Houston - Department of Economics.
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  22. Cramton, Peter, 1998. "The Efficiency of the FCC Spectrum Auctions," Journal of Law & Economics, University of Chicago Press, vol. 41(2), pages 727-36, October.
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  23. Szentes, Balazs & Rosenthal, Robert W., 2003. "Beyond chopsticks: Symmetric equilibria in majority auction games," Games and Economic Behavior, Elsevier, vol. 45(2), pages 278-295, November. [Downloadable!] (restricted)
  24. Damme, E. van, 1999. "The Dutch DCS-1800 auction," Discussion Paper 77, Tilburg University, Center for Economic Research. [Downloadable!]
  25. Krishna, Vijay & Rosenthal, Robert W., 1996. "Simultaneous Auctions with Synergies," Games and Economic Behavior, Elsevier, vol. 17(1), pages 1-31, November. [Downloadable!] (restricted)
    Other versions:
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Sandro Brusco & Giuseppe Lopomo, 2009. "Simultaneous ascending auctions with complementarities and known budget constraints," Economic Theory, Springer, vol. 38(1), pages 105-124, January. [Downloadable!] (restricted)
  2. Emiel Maasland & Sander Onderstal, 2006. "Going, Going, Gone! A Swift Tour of Auction Theory and its Applications," De Economist, Springer, vol. 154(2), pages 197-249, June. [Downloadable!] (restricted)
    Other versions:
  3. Leufkens, Kasper & Peeters, Ronald & Vorsatz, Marc, 2006. "Sequential auctions with synergies: An experimental analysis," Research Memoranda 040, Maastricht : METEOR, Maastricht Research School of Economics of Technology and Organization. [Downloadable!]
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