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.
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