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Home-grown values and incentive compatible auction design

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Author Info
E. Elisabet RutstrÃm () (Department of Economics, College of Business Administration, University of South Carolina, Columbia, SC 29208, USA)
Abstract

The behavioral properties of several auctions designed to elicit individual valuations for an object are studied using controlled laboratory experiments. Our experiments lead us to conclude that there are some behavioral differences between alternative incentive-compatible institutions for eliciting home-grown values, contrary to the theoretical expectation that these institutions are isomorphic. These results are consistent with earlier experimental results using induced values. The most important finding is that English auctions appear to elicit lower bids than Vickrey auctions, after controlling for observable socio-economic characteristics. Moreover, English auction bids also exhibit significantly less residual variance and may be sensitive to the number of rival bidders. It appears that the real-time learning allowed in the English auction significantly affects subject behavior. We also find that values elicited with the Becker, DeGroot and Marshak institution differ from those in both English and Vickrey auctions.

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Publisher Info
Article provided by Springer in its journal International Journal of Game Theory.

Volume (Year): 27 (1998)
Issue (Month): 3 ()
Pages: 427-441
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Handle: RePEc:spr:jogath:v:27:y:1998:i:3:p:427-441

Note: Received November 1993/Final version May 1995
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Related research
Keywords: Auctions · English auctions · Vickrey auctions · value elicitation · experiments;

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  1. Marco Casari & John C. Ham & John H. Kagel, 2005. "Selection bias, demographic effects, and ability effects in common value auction experiments," Staff Reports 213, Federal Reserve Bank of New York. [Downloadable!]
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  2. Shosh Shahrabani & Uri Benzion & Tal Shavit, 2008. "WTP and WTA in competitive and non-competitive environments," Judgment and Decision Making, Society for Judgment and Decision Making, vol. 3, pages 153-161, February. [Downloadable!]
  3. Horowitz, John & List, John & McConnell, Kenneth, 2004. "Diminishing Marginal Value," 2004 Annual meeting, August 1-4, Denver, CO 20297, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association). [Downloadable!]
  4. Ronald G. Cummings & Laura O. Taylor, 1999. "Unbiased Value Estimates for Environmental Goods: A Cheap Talk Design for the Contingent Valuation Method," American Economic Review, American Economic Association, vol. 89(3), pages 649-665, June. [Downloadable!] (restricted)
  5. Glenn W. Harrison & Morten I. Lau & E. Elisabet Rutstrom, 2005. "Dynamic Consistency in Denmark: A Longitudinal Field Experiment," Artefactual Field Experiments 0051, The Field Experiments Website. [Downloadable!]
  6. Paola Manzini & Marco Mariotti, 2007. "Choice Over Time," IZA Discussion Papers 2993, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
    • Paola Manzini & Marco Mariotti, 2007. "Choice over Time," Working Papers 605, Queen Mary, University of London, Department of Economics. [Downloadable!]
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