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The chopstick auction: A study of the exposure problem in multi-unit auctions

  • Englmaier, Florian
  • Guillén, Pablo
  • Llorente, Loreto
  • Onderstal, Sander
  • Sausgruber, Rupert

Multi-unit auctions are sometimes plagued by the so-called exposure problem. In this paper, we analyze a simple game called the "chopstick auction" in which bidders are confronted with the exposure problem. We do so both in theory and in a laboratory experiment. In theory, the chopstick auction has an efficient equilibrium and is revenue equivalent with the second-price sealed-bid auction in which the exposure problem is not present. In the experiment, however, we find that the chopstick auction is less efficient than the second-price sealed-bid auction and that it yields more [the same] revenue if bidders are inexperienced [experienced].

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Article provided by Elsevier in its journal International Journal of Industrial Organization.

Volume (Year): 27 (2009)
Issue (Month): 2 (March)
Pages: 286-291

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Handle: RePEc:eee:indorg:v:27:y:2009:i:2:p:286-291
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505551

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