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Perfect Equilibria in Budget-Constrained Sequential Auctions: An Experimental Study

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  • Carolyn Pitchik
  • Andrew Schotter

Abstract

This article presents an experimental study of bidding behavior in sequential auctions in which there are budget constraints and perfect information. Our experiments test both the properties of such auctions and the predictive power of a refinement of the Nash equilibrium concept. We find that budget constraints affect the behavior of bidders and that the trembling-hand perfect equilibrium is generally a good predictor of prices.

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Bibliographic Info

Article provided by The RAND Corporation in its journal RAND Journal of Economics.

Volume (Year): 19 (1988)
Issue (Month): 3 (Autumn)
Pages: 363-388

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Handle: RePEc:rje:randje:v:19:y:1988:i:autumn:p:363-388

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Cited by:
  1. Peter Cramton, 1995. "Money Out of Thin Air: The Nationwide Narrowband PCS Auction," Papers of Peter Cramton 95jems, University of Maryland, Department of Economics - Peter Cramton, revised 09 Jun 1998.
  2. Roberto Burguet & R. Preston McAfee, 2008. "License Prices for Financially Constrained Firms," UFAE and IAE Working Papers 745.08, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
  3. Yeon-Koo Che & Ian Gale, 1994. "Auctions with budget-constrained buyers: a nonequivalence result," Working Paper 9402, Federal Reserve Bank of Cleveland.
  4. Ettinger, David, 2010. "Bidding among friends and enemies with symmetric information," Economics Papers from University Paris Dauphine 123456789/5447, Paris Dauphine University.
  5. Beker, Pablo & Hernando-Veciana, Angel, 2013. "Bidding Markets with Financial Constraints," The Warwick Economics Research Paper Series (TWERPS) 1017, University of Warwick, Department of Economics.
  6. Schnitzlein, Charles R. & Shao, Minjie, 2013. "Capacity constraints and the winner's curse in multi-unit common value auctions," The Quarterly Review of Economics and Finance, Elsevier, vol. 53(2), pages 188-201.
  7. Ettinger, David, 2008. "Auctions and shareholdings," Economics Papers from University Paris Dauphine 123456789/5431, Paris Dauphine University.

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