Prices as Indicators of Scarcity: An Experimental Study of a Multistage Auction
AbstractThe price mecanism is the primary means of information transfer in decentralized economic systems. High prices indicate high demand, whereas low prices indicate low demand. Thus prices are the signals for accelerating or slowing production. However, using sequential, multi-unit auctions, we show that the price mechanism fails to be beneficial for producers in every case. As an example we discuss auctions for future access rights to a network. We use experiments to show that the incentives for free-riding inherent in auctions for future access provide inaccurate signals for investment.
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Bibliographic InfoPaper provided by Department of Economics, Appalachian State University in its series Working Papers with number 04-18.
Date of creation: 2004
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Other versions of this item:
- Tanga McDaniel & Andreas Nicklisch, 2004. "Prices as indicators of scarcity - an experimental study of a multistage auction," Papers on Strategic Interaction 2004-30, Max Planck Institute of Economics, Strategic Interaction Group.
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.:
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24, Barcelona Graduate School of Economics.
- Tibor Neugebauer & Paul Pezanis-Christou, 2003. "Bidding at Sequential First-Price Auctions with(out) Supply Uncertainty: A Laboratory Analysis," UFAE and IAE Working Papers 558.03, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
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