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

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

Abstract

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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  • Englmaier, Florian & Guillén, Pablo & Llorente, Loreto & Onderstal, Sander & Sausgruber, Rupert, 2009. "The chopstick auction: A study of the exposure problem in multi-unit auctions," International Journal of Industrial Organization, Elsevier, vol. 27(2), pages 286-291, March.
  • Handle: RePEc:eee:indorg:v:27:y:2009:i:2:p:286-291
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    Cited by:

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    2. Meng, Xin & Gunay, Hikmet, 2017. "Exposure problem in multi-unit auctions," International Journal of Industrial Organization, Elsevier, vol. 52(C), pages 165-187.
    3. Brusco, Sandro & Lopomo, Giuseppe & Marx, Leslie M., 2009. "The [`]Google effect' in the FCC's 700Â MHz auction," Information Economics and Policy, Elsevier, vol. 21(2), pages 101-114, June.
    4. Shakun D. Mago & Roman M. Sheremeta, 2017. "Multi‐battle Contests: An Experimental Study," Southern Economic Journal, John Wiley & Sons, vol. 84(2), pages 407-425, October.
    5. Emiel Maasland & Sander Onderstal, 2006. "Going, Going, Gone! A Swift Tour of Auction Theory and Its Applications," De Economist, Springer, vol. 154(3), pages 481-481, September.
    6. Christian Ewerhart, 2016. "A "fractal" solution to the chopstick auction," ECON - Working Papers 229, Department of Economics - University of Zurich, revised Apr 2017.
    7. Anthony M. Kwasnica & Katerina Sherstyuk, 2013. "Multiunit Auctions," Journal of Economic Surveys, Wiley Blackwell, vol. 27(3), pages 461-490, July.

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    More about this item

    Keywords

    Chopstick auction Exposure problem Laboratory experiment Second-price sealed-bid auction;

    JEL classification:

    • C9 - Mathematical and Quantitative Methods - - Design of Experiments
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions

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