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A laboratory stress-test of bid, double and offer auctions

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Author Info
Morten Søberg () (Statistics Norway)
Abstract

This paper reports on the empirical properties of the bid auction (buyers propose prices), offer auction (sellers suggest prices) and double auction (both buyers and seller initiate price quotes). These trading institutions are stress-tested using a nonstationary monopolistic market environment in which the buyers' demand schedule and the single seller's supply curve shift unpredictably between trading periods. The principal result is threefold. First, double-auction prices tend to be greater than offer-auction prices which again tend to be greater than bid-auction prices. Second, the listed ranking reflects tendencies only. The laboratory data do not support statistically significant behavioral differences between the three auctions. Third, trading is highly efficient regardless of auction type.

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Paper provided by Research Department of Statistics Norway in its series Discussion Papers with number 327.

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Date of creation: Aug 2002
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Handle: RePEc:ssb:dispap:327

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Related research
Keywords: Sequential auctions; experimental economics.;

Find related papers by JEL classification:
D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
C90 - Mathematical and Quantitative Methods - - Design of Experiments - - - General

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  1. Ledyard, John O. & Szakaly-Moore, Kristin, 1994. "Designing organizations for trading pollution rights," Journal of Economic Behavior & Organization, Elsevier, vol. 25(2), pages 167-196, October. [Downloadable!] (restricted)
  2. Joyce, Patrick, 1983. "Information and behavior in experimental markets," Journal of Economic Behavior & Organization, Elsevier, vol. 4(4), pages 411-424, December. [Downloadable!] (restricted)
  3. Jamison, Julian C. & Plott, Charles R., 1997. "Costly offers and the equilibration properties of the multiple unit double auction under conditions of unpredictable shifts of demand and supply," Journal of Economic Behavior & Organization, Elsevier, vol. 32(4), pages 591-612, April. [Downloadable!] (restricted)
  4. Klemperer, P., 1999. "Auction Theory: a Guide to the Literature," Economics Papers 1999-w12, Economics Group, Nuffield College, University of Oxford.
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  5. Smith, Vernon L, 1982. "Microeconomic Systems as an Experimental Science," American Economic Review, American Economic Association, vol. 72(5), pages 923-55, December. [Downloadable!] (restricted)
  6. Davis, Douglas D. & Harrison, Glenn W. & Williams, Arlington W., 1993. "Convergence to nonstationary competitive equilibria : An experimental analysis," Journal of Economic Behavior & Organization, Elsevier, vol. 22(3), pages 305-326, December. [Downloadable!] (restricted)
  7. Plott, Charles R & Smith, Vernon L, 1978. "An Experimental Examination of Two Exchange Institutions," Review of Economic Studies, Blackwell Publishing, vol. 45(1), pages 133-53, February. [Downloadable!] (restricted)
    Other versions:
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