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Allotment in first-price auctions: an experimental investigation

Author

Listed:
  • Luca Corazzini

    (University of Messina
    ISLA, Bocconi University)

  • Stefano Galavotti

    (University of Padova
    University of Padova)

  • Rupert Sausgruber

    (Vienna University of Economics and Business)

  • Paola Valbonesi

    (University of Padova
    National Research University Higher School of Economics
    University of Padova)

Abstract

We experimentally study the effects of allotment—the division of an item into homogeneous units—in independent private value auctions. We compare a bundling first-price auction with two equivalent treatments where allotment is implemented: a two-unit discriminatory auction and two simultaneous single-unit first-price auctions. We find that allotment in the form of a discriminatory auction generates a loss of efficiency with respect to bundling. In the allotment treatments, we observe large and persistent bid spread, and the discriminatory auction is less efficient than simultaneous auctions. We provide a unified interpretation of our results that is based on both a non-equilibrium response to the coordination problem characterizing the simultaneous auction format and a general class of behavioral preferences that includes risk aversion, joy of winning and loser’s regret as specific cases.

Suggested Citation

  • Luca Corazzini & Stefano Galavotti & Rupert Sausgruber & Paola Valbonesi, 2017. "Allotment in first-price auctions: an experimental investigation," Experimental Economics, Springer;Economic Science Association, vol. 20(1), pages 70-99, March.
    • Handle: RePEc:kap:expeco:v:20:y:2017:i:1:d:10.1007_s10683-016-9476-1
    DOI: 10.1007/s10683-016-9476-1
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    More about this item

    Keywords

    Allotment; Multi-unit auction; Discriminatory auction; First-price auction; Laboratory experiment;
    All these keywords.

    JEL classification:

    • H57 - Public Economics - - National Government Expenditures and Related Policies - - - Procurement
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions

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