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Implementing efficient multi-object auction institutions: An experimental study of the performance of boundedly rational agents

  • Kagel, John H.
  • Levin, Dan

We study three alternative implementations of the Vickrey multi-unit demand auction: Vickrey's original static sealed-bid auction and two dynamic/Ausubel auctions, with and without public dropout information reported during the auction. Although implemented by a weaker solution concept, behavior in the dynamic Vickrey auction with the public dropout information comes significantly closer to the theoretical prediction of sincere bidding, bidding one's valuations, than either the static Vickrey auction or the dynamic auction without dropout information. This suggests a possible tradeoff between the simplicity and transparency of a mechanism and the strength of its solution concept when agents are still learning and/or when players are not fully rational. Drawing on results from related single-unit and multi-unit demand auctions, and the results of a new single-unit demand auction experiment, we provide important insights into the behavioral mechanism underlying the superior performance of the Ausubel auction with feedback information.

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Article provided by Elsevier in its journal Games and Economic Behavior.

Volume (Year): 66 (2009)
Issue (Month): 1 (May)
Pages: 221-237

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Handle: RePEc:eee:gamebe:v:66:y:2009:i:1:p:221-237
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622836

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  1. Yan Chen & Fang-Fang Tang, 1998. "Learning and Incentive-Compatible Mechanisms for Public Goods Provision: An Experimental Study," Journal of Political Economy, University of Chicago Press, vol. 106(3), pages 633-662, June.
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  3. Dirk Engelmann & Veronika Grimm, 2006. "Bidding Behavior in Multi-Unit Auctions - An Experimental Investigation," Working Paper Series in Economics 24, University of Cologne, Department of Economics.
  4. Manelli, Alejandro M. & Sefton, Martin & Wilner, Benjamin S., 2006. "Multi-unit auctions: A comparison of static and dynamic mechanisms," Journal of Economic Behavior & Organization, Elsevier, vol. 61(2), pages 304-323, October.
  5. Ronald Harstad, 2000. "Dominant Strategy Adoption and Bidders' Experience with Pricing Rules," Experimental Economics, Springer, vol. 3(3), pages 261-280, December.
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  7. Milgrom, Paul R & Weber, Robert J, 1982. "A Theory of Auctions and Competitive Bidding," Econometrica, Econometric Society, vol. 50(5), pages 1089-1122, September.
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  11. Dirk Engelmann & Veronika Grimm, 2003. "Bidding Behavior in Multi-Unit Auctions - An Experimental Investigation and some Theoretical Insights," CERGE-EI Working Papers wp210, The Center for Economic Research and Graduate Education - Economic Institute, Prague.
  12. Kagel, John H & Harstad, Ronald M & Levin, Dan, 1987. "Information Impact and Allocation Rules in Auctions with Affiliated Private Values: A Laboratory Study," Econometrica, Econometric Society, vol. 55(6), pages 1275-1304, November.
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  17. Kagel, John H & Levin, Dan, 2001. "Behavior in Multi-unit Demand Auctions: Experiments with Uniform Price and Dynamic Vickrey Auctions," Econometrica, Econometric Society, vol. 69(2), pages 413-54, March.
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  21. repec:feb:framed:0052 is not listed on IDEAS
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