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 Max Planck Institute of Economics, Strategic Interaction Group in its series Papers on Strategic Interaction with number 2004-30.
Length: 22 pages
Date of creation: Jun 2004
Date of revision:
Other versions of this item:
- 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.
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.:
- Tanga McDaniel & Neuhoff, K., 2002. "Auctions to gas transmission access: The British experience," Cambridge Working Papers in Economics 0234, Faculty of Economics, University of Cambridge.
- Tibor Neugebauer & Paul Pezanis-Christou, 2003.
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UFAE and IAE Working Papers
558.03, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
- Tibor Neugebauer & Paul Pezanis-Christou, 2003. "Bidding at Sequential First-Price Auctions with(out) Supply Uncertainty: a Laboratory Analysis," Working Papers 24, Barcelona Graduate School of Economics.
- R. Preston McAfee & Daniel Vincent, 1994.
"Sequentially Optimal Auctions,"
1104, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer, vol. 10(2), pages 171-178, June.
- Tanga McDaniel & Karsten Neuhoff, 2003.
"Use of Long-term Auctions for Network Investment,"
2003.29, Fondazione Eni Enrico Mattei.
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