Fear of Losing in a Clock Auction
AbstractWe examine bidding behavior in a clock auction in which price is set by the lowest-accepted bid and provisional winners are reported each round (the LABpw auction). This format was used in the India 3G spectrum auction. In the standard theory, the auction performs poorly. In particular it yields lower revenues and is less efficient than the more standard clock auction with exit bids and highest-rejected-bid pricing (the HRB auction). However, the LABpw auction performs well in the lab, achieving higher revenues than the HRB auction. We show how fear of losing provides one motivation for the overbidding that causes higher revenues in the LABpw auction.
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Bibliographic InfoPaper provided by University of Maryland, Department of Economics - Peter Cramton in its series Papers of Peter Cramton with number 12cfosf.
Length: 20 pages
Date of creation: 2012
Date of revision: 2012
Publication status: Published in Review of Economic Design, 16:2-3, 119-134, 2012
Contact details of provider:
Postal: Economics Department, University of Maryland, College Park, MD 20742-7211
Phone: (202) 318-0520
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Web page: http://www.cramton.umd.edu
Auctions; clock auctions; spectrum auctions; behavioral economics; market design;
Other versions of this item:
- D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
- C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
- L96 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Telecommunications
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-10-13 (All new papers)
- NEP-EXP-2012-10-13 (Experimental Economics)
- NEP-HPE-2012-10-13 (History & Philosophy of Economics)
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.:
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