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An experimental examination of demand reduction in multi-unit versions of the Uniform-price, Vickrey, and English auctions

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  • David Porter

    (Interdisciplinary Center for Economic Science, George Mason University, USA)

  • Roumen Vragov

    (Baruch College City, University of New York, USA)

Abstract

Demand reduction in Uniform-price and English auctions are strategic reactions by participants to reduce price and thus increase potential profits. Laboratory experiments similar to the field experiments performed by List and Reiley (Am. Econ. Rev. 2000; 9 (4): 961-972) in which two individuals with demands for two units vie for two units through a Uniform-price, English or Vickrey auction are conducted. We find strong support for demand reduction in both the English and Uniform-price auctions, with significantly more dramatic reductions in the English auction. However, there is significant overbidding in both the Vickrey and Uniform-price auction. This overbidding solves a puzzle found by List and Reiley in their field experiment data. Copyright © 2006 John Wiley & Sons, Ltd.

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Bibliographic Info

Article provided by John Wiley & Sons, Ltd. in its journal Managerial and Decision Economics.

Volume (Year): 27 (2006)
Issue (Month): 6 ()
Pages: 445-458

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Handle: RePEc:wly:mgtdec:v:27:y:2006:i:6:p:445-458

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Web page: http://www3.interscience.wiley.com/cgi-bin/jhome/7976

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  1. Kagel, John H & Levin, Dan, 2001. "Behavior in Multi-unit Demand Auctions: Experiments with Uniform Price and Dynamic Vickrey Auctions," Econometrica, Econometric Society, Econometric Society, vol. 69(2), pages 413-54, March.
  2. John A. List & David Lucking-Reiley, 2002. "Bidding Behavior and Decision Costs in Field Experiments," Economic Inquiry, Western Economic Association International, Western Economic Association International, vol. 40(4), pages 611-619, October.
  3. Forsythe, Robert & Isaac, R. Mark & Palfrey, Thomas R., 1987. "Theories and Tests of (Blind Bidding) in Sealed Bid Auctions," Working Papers, California Institute of Technology, Division of the Humanities and Social Sciences 670, California Institute of Technology, Division of the Humanities and Social Sciences.
  4. Lawrence M. Ausubel & Peter Cramton, 1995. "Demand Reduction and Inefficiency in Multi-Unit Auctions," Papers of Peter Cramton 98wpdr, University of Maryland, Department of Economics - Peter Cramton, revised 22 Jul 2002.
  5. Rothkopf, Michael H & Teisberg, Thomas J & Kahn, Edward P, 1990. "Why Are Vickrey Auctions Rare?," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 98(1), pages 94-109, February.
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Citations

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Cited by:
  1. Dirk Engelmann & Veronika Grimm, 2003. "Bidding Behavior in Multi-Unit Auctions - An Experimental Investigation and some Theoretical Insights," CERGE-EI Working Papers wp210, The Center for Economic Research and Graduate Education - Economic Institute, Prague.
  2. Burtraw, Dallas & Goeree, Jacob & Holt, Charles A. & Myers, Erica & Palmer, Karen & Shobe, William, 2008. "Collusion in Auctions for Emission Permits: An Experimental Analysis," Discussion Papers, Resources For the Future dp-08-36, Resources For the Future.
  3. John List, 2006. "Field experiments: A bridge between lab and naturally occurring data," Artefactual Field Experiments, The Field Experiments Website 00083, The Field Experiments Website.
  4. Raphaële Préget & Sophie Thoyer, 2009. "Multi-Unit Auctions and Competition Stricture," Working Papers, LAMETA, Universtiy of Montpellier 09-18, LAMETA, Universtiy of Montpellier, revised Dec 2009.
  5. Richard Engelbrecht-Wiggans & John A. List & David H. Reiley, 2005. "Demand Reduction in Multi-Unit Auctions: Evidence from a Sportscard Field Experiment: Reply," American Economic Review, American Economic Association, American Economic Association, vol. 95(1), pages 472-476, March.
  6. Katerina Sherstyuk, 2002. "Some Results on Anti-Competitive Behavior in Multi-Unit Ascending Price Auctions," Working Papers, University of Hawaii at Manoa, Department of Economics 200207, University of Hawaii at Manoa, Department of Economics.
  7. List, John A. & Reiley, David, 2008. "Field Experiments in Economics: Palgrave Entry," IZA Discussion Papers 3273, Institute for the Study of Labor (IZA).
  8. Kagel, John H. & Levin, Dan, 2009. "Implementing efficient multi-object auction institutions: An experimental study of the performance of boundedly rational agents," Games and Economic Behavior, Elsevier, Elsevier, vol. 66(1), pages 221-237, May.
  9. Cong, Rong-Gang & Wei, Yi-Ming, 2012. "Experimental comparison of impact of auction format on carbon allowance market," Renewable and Sustainable Energy Reviews, Elsevier, Elsevier, vol. 16(6), pages 4148-4156.

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