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An experimental study on sequential auctions with privately known capacities

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  • Corazzini, Luca
  • Galavotti, Stefano
  • Valbonesi, Paola

Abstract

We experimentally study sequential procurement auctions where bidders' capacity constraints are private information. Our experiment involves two first-price auctions with a belief elicitation stage at the end of the first. Our results show that (i) observed behavior in the second auction is overall consistent with sequential rationality; (ii) first auction bids are decreasing in the capacity of the bidder, but (iii) stated beliefs are inconsistent with the actual play. Hence, subjects seem to be aware of the opportunity cost of early bids (which leads capacity constrained bidders to bid more cautiously than unconstrained ones); on the other hand, since they do not recognize the informative content of bids, the potential signaling cost associated with early bids does not come into play.

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  • Corazzini, Luca & Galavotti, Stefano & Valbonesi, Paola, 2019. "An experimental study on sequential auctions with privately known capacities," Games and Economic Behavior, Elsevier, vol. 117(C), pages 289-315.
    • Handle: RePEc:eee:gamebe:v:117:y:2019:i:c:p:289-315
    DOI: 10.1016/j.geb.2019.06.005
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    More about this item

    Keywords

    Sequential auctions; Capacity constraints; Belief updating;
    All these keywords.

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making

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