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Framing the first-price auction

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  • Theodore Turocy

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  • Elizabeth Watson
  • Raymond Battalio

Abstract

We revisit the result that, in laboratory independent private values auction, the first-price sealed bid and descending clock (or Dutch) implementations are not isomorphic. We investigate the hypothesis that this arises from framing and presentation effects. Our design focuses on a careful construction of subject interfaces that present the two environments as similarly as possible. Our sessions also consist of more auction periods to test whether any initial framing effects subsequently decrease over time. We find the difference between the implementations persists. To further investigate the difference, we report on an intermediate implementation which operates like the Dutch auction, but in which the clock continues to tick to the lowest price without informing bidders when others have bid on the object. Copyright Economic Science Association 2007

Suggested Citation

  • Theodore Turocy & Elizabeth Watson & Raymond Battalio, 2007. "Framing the first-price auction," Experimental Economics, Springer;Economic Science Association, vol. 10(1), pages 37-51, March.
  • Handle: RePEc:kap:expeco:v:10:y:2007:i:1:p:37-51 DOI: 10.1007/s10683-006-9130-4
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    File URL: http://hdl.handle.net/10.1007/s10683-006-9130-4
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    References listed on IDEAS

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    1. Timothy N. Cason & Daniel Friedman, 1997. "Price Formation in Single Call Markets," Econometrica, Econometric Society, vol. 65(2), pages 311-346, March.
    2. Cox, James C & Smith, Vernon L & Walker, James M, 1988. "Theory and Individual Behavior of First-Price Auctions," Journal of Risk and Uncertainty, Springer, vol. 1(1), pages 61-99, March.
    3. Elena Katok & Anthony Kwasnica, 2008. "Time is money: The effect of clock speed on seller’s revenue in Dutch auctions," Experimental Economics, Springer;Economic Science Association, vol. 11(4), pages 344-357, December.
    4. Gode, D.K. & Sunder, S., 1991. "Allocative Efficiency of Markets with Zero Intelligence (Z1) Traders: Market as a Partial Substitute for Individual Rationality," GSIA Working Papers 1992-16, Carnegie Mellon University, Tepper School of Business.
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    Citations

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    Cited by:

    1. Yusufcan Masatlioglu & Sarah Taylor & Neslihan Uler, 2012. "Behavioral mechanism design: evidence from the modified first-price auctions," Review of Economic Design, Springer;Society for Economic Design, vol. 16(2), pages 159-173, September.
    2. Kagel, John H. & Levin, Dan, 2009. "Implementing efficient multi-object auction institutions: An experimental study of the performance of boundedly rational agents," Games and Economic Behavior, Elsevier, vol. 66(1), pages 221-237, May.
    3. Theodore L. Turocy & Elizabeth Watson, 2012. "Reservation Values and Regret in Laboratory First-Price Auctions: Context and Bidding Behavior," Southern Economic Journal, Southern Economic Association, vol. 78(4), pages 1163-1180, April.
    4. Theodore L. Turocy & Timothy N. Cason, 2015. "Bidding in first-price and second-price interdependent-values auctions: A laboratory experiment," Working Paper series, University of East Anglia, Centre for Behavioural and Experimental Social Science (CBESS) 15-23, School of Economics, University of East Anglia, Norwich, UK..
    5. Fugger, Nicolas & Gillen, Philippe & Rasch, Alexander & Zeppenfeld, Christopher, 2016. "Preferences and Decision Support in Competitive Bidding," Annual Conference 2016 (Augsburg): Demographic Change 145849, Verein für Socialpolitik / German Economic Association.
    6. Justin S. Skillman & Michael J. Vernarelli, 2016. "Framing effects on bidding behavior in experimental first-price sealed-bid money auctions," Judgment and Decision Making, Society for Judgment and Decision Making, pages 391-400.
    7. Meroz, Yael & Morone, Andrea & Morone, Piergiuseppe, 2009. "Eliciting environmental preferences of Ghanaians in the laboratory: An incentive-compatible experiment," MPRA Paper 17107, University Library of Munich, Germany.
    8. Rapoport, Amnon & Otsubo, Hironori & Kim, Bora & Stein, William E., 2007. "Unique bid auctions: Equilibrium solutions and experimental evidence," MPRA Paper 4185, University Library of Munich, Germany, revised 17 Jul 2007.
    9. Fugger, Nicolas & Gillen, Philippe & Rasch, Alexander & Zeppenfeld, Christopher, 2017. "Preferences and decision support in competitive bidding," ZEW Discussion Papers 17-057, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.

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    Keywords

    Auctions; First-price; Isomorphism;

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