Buy or wait, that is the option : the buyer's option in sequential laboratory auctions
AbstractThis paper reports the results from an experiment on two-unit sequential auctions with and without a buyer’s option (which gives the winner of the first auction the right to buy the second unit at the winning price). The demand for the two items is either decreasing, flat, or increasing. The 4 main auction institutions (first-price, Dutch, second-price, English) are studied. We find that observed bidding behavior is close to Nash equilibrium bidding in the auctions for the second unit, but there are substantial deviations in the auctions for the first unit. Despite these deviations, the buyer’s option is correctly used in most cases. The revenue-ranking of the 4 auction institutions is the same as in single-unit experiments. Finally, successive prices are declining when the buyer’s option is available. The last 2 results are used to compare real-life auctions and to discuss the findings in related field-data studies.
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Bibliographic InfoPaper provided by Laboratoire d'Economie Appliquee, INRA in its series Research Unit Working Papers with number 0410.
Length: 34 pages
Date of creation: Oct 2004
Date of revision:
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experimental economics; sequential auctions; buyer's option;
Other versions of this item:
- Philippe Fevrier & Laurent Linnemer & Michael Visser, 2001. "Buy or Wait, That is the Option. The Buyer’s Option in Sequential Laboratory Auctions," Working Papers 2001-30, Centre de Recherche en Economie et Statistique.
- C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
- D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
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- Anthony M. Kwasnica & Katerina Sherstyuk, 2013. "Multi-Unit Auctions," Working Papers 201301, University of Hawaii at Manoa, Department of Economics.
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