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Keeping out Trojan Horses: Auctions and Bankruptcy in the Laboratory

Author

Listed:
  • Sander Onderstal

    (University of Amsterdam)

  • Ailko van der Veen

    (University of Amsterdam)

Abstract

If a government auctions the right to market a good, continuity is likely to be of significant importance. In a laboratory experiment, we compare the effects of bidders' limited liability in the first-price sealed-bid auction and the English auction in a common value setting. Our data strongly reject our theoretical prediction that the English auction leads to less aggressive bids and fewer bankruptcies than the first-price sealed-bid auction. X -cursedness gives a robust explanation of our experimental observations, in contrast to risk aversion and asymmetric equilibria.

Suggested Citation

  • Sander Onderstal & Ailko van der Veen, 2011. "Keeping out Trojan Horses: Auctions and Bankruptcy in the Laboratory," Tinbergen Institute Discussion Papers 11-024/1, Tinbergen Institute.
  • Handle: RePEc:tin:wpaper:20110024
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    References listed on IDEAS

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    Cited by:

    1. Pagnozzi, Marco & Saral, Krista J., 2019. "Auctions with limited liability through default or resale," Journal of Economic Behavior & Organization, Elsevier, vol. 159(C), pages 51-74.

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    More about this item

    Keywords

    Auctions; Bankruptcy; Laboratory Experiment;
    All these keywords.

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices

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