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Bidding at Sequential First-Price Auctions with(out) Supply Uncertainty: A Laboratory Analysis

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We report on a series of experiments that test the effects of an uncertain supply on the formation of bids and prices in sequential first-price auctions with private-independent values and unit-demands. Supply is assumed uncertain when buyers do not know the exact number of units to be sold (i.e., the length of the sequence). Although we observe a non-monotone behavior when supply is certain and an important overbidding, the data qualitatively support our price trend predictions and the risk neutral Nash equilibrium model of bidding for the last stage of a sequence, whether supply is certain or not. Our study shows that behavior in these markets changes significantly with the presence of an uncertain supply, and that it can be explained by assuming that bidders formulate pessimistic beliefs about the occurrence of another stage.

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Paper provided by Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC) in its series UFAE and IAE Working Papers with number 558.03.

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Length: 34
Date of creation: 07 Feb 2003
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Handle: RePEc:aub:autbar:558.03

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Keywords: sequential first-price auctions; independent private values; unit-demand; supply uncertainty; bidding behavior; price trends; experimental economics;

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Citations

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Cited by:
  1. Tibor Neugebauer, 2005. "Bidding Strategies Of Sequential First Price Auctions Programmed By Experienced Bidders," Experimental 0503007, EconWPA.
  2. Tanga McDaniel & Andreas Nicklisch, 2004. "Prices as Indicators of Scarcity: An Experimental Study of a Multistage Auction," Working Papers 04-18, Department of Economics, Appalachian State University.
  3. Tibor Neugebauer, 2007. "Bid and price effects of increased competition in the first-price auction: experimental evidence," LSF Research Working Paper Series 07-17, Luxembourg School of Finance, University of Luxembourg.

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