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A laboratory study of Demand Reduction and Collusion in Uniform- and Discriminatory-Price Auctions

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Author Info
Alexander Elbittar () (Centro de Investigacion y Docencia Economica (CIDE))
Andrei Gomberg () (Centro de Investigacion Economica (CIE), Instituto Tecnologico Autonomo de Mexico (ITAM))

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Abstract

We report results of an experimental study of multi-object uniform and discriminatory-price auctions in an environment of publicly known common values, concentrating on an environment where theory predicts sharply different results of the two auction formats. We find that the bidding behavior in the uniform case exhibits two clear regularities: agents consistently play weakly dominated strategies by overbidding on the first unit and have moderate difficulty coordinating on the high payoff (low auction revenue) equilibrium predicted by theory. However, subjects with experience in the same environment are better at reducing demand to achieve higher payoff. Bidders in discriminatory auctions, as predicted, tend to submit bids close to value for all units and are not generally successful in attempts at collusion.

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File URL: http://ftp.itam.mx/pub/academico/inves/gomberg/08-01.pdf
File Format: application/pdf
File Function: First version, 2008
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Publisher Info
Paper provided by Centro de Investigacion Economica, ITAM in its series Working Papers with number 0801.

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Length: 18 pages
Date of creation: Feb 2008
Date of revision:
Handle: RePEc:cie:wpaper:0801

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Related research
Keywords: Experimental economics; Second price auctions;

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  1. Orly Sade & Charles Schnitzlein & Jaime F. Zender, 2006. "Competition and Cooperation in Divisible Good Auctions: An Experimental Examination," Review of Financial Studies, Oxford University Press for Society for Financial Studies, vol. 19(1), pages 195-235. [Downloadable!] (restricted)
  2. Orly Sade & Charles Schnitzlein & Jaime Zender, 2006. "Competition and Cooperation in Divisible Good Auctions: An Experimental Examination," Artefactual Field Experiments 0076, The Field Experiments Website. [Downloadable!]
  3. Ronald Harstad, 2000. "Dominant Strategy Adoption and Bidders' Experience with Pricing Rules," Experimental Economics, Springer, vol. 3(3), pages 261-280, December. [Downloadable!] (restricted)
  4. Wilson, Robert, 1979. "Auctions of Shares," The Quarterly Journal of Economics, MIT Press, vol. 93(4), pages 675-89, November. [Downloadable!] (restricted)
  5. 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. [Downloadable!]
  6. Kagel, John H & Harstad, Ronald M & Levin, Dan, 1987. "Information Impact and Allocation Rules in Auctions with Affiliated Private Values: A Laboratory Study," Econometrica, Econometric Society, vol. 55(6), pages 1275-1304, November. [Downloadable!] (restricted)
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