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Keeping out Trojan Horses: Auctions and Bankruptcy in the Laboratory

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  • Sander Onderstal

    (University of Amsterdam)

  • Ailko van der Veen

    (University of Amsterdam)

Abstract

If a government auctions the right to market a good, continuity is likely to be of significant importance. In a laboratory experiment, we compare the effects of bidders' limited liability in the first-price sealed-bid auction and the English auction in a common value setting. Our data strongly reject our theoretical prediction that the English auction leads to less aggressive bids and fewer bankruptcies than the first-price sealed-bid auction. X -cursedness gives a robust explanation of our experimental observations, in contrast to risk aversion and asymmetric equilibria.

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Bibliographic Info

Paper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 11-024/1.

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Date of creation: 11 Feb 2011
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Handle: RePEc:dgr:uvatin:20110024

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Keywords: Auctions; Bankruptcy; Laboratory Experiment;

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  1. Matthew Rhodes-Kropf & S. Viswanathan, 2000. "Corporate Reorganizations and Non-Cash Auctions," Journal of Finance, American Finance Association, vol. 55(4), pages 1807-1854, 08.
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