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Behavioral mechanism design: evidence from the modified first-price auctions

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  • Yusufcan Masatlioglu
  • Sarah Taylor
  • Neslihan Uler

Abstract

This paper tests the behavioral equivalence of a class of strategically-equivalent mechanisms that also do not differ in terms of their procedures. In a private value setting, we introduce a family of mechanisms, so-called Mechanism (α), that generalizes the standard first-price sealed-bid auction. In Mechanism (α), buyers are asked to submit a value which will then be multiplied by α to calculate the bids in the auction. When α = 1, Mechanism (α) is the standard first-price sealed-bid auction. We show that for any α, calculated bids should be identical across mechanisms. We conduct a laboratory experiment to test the behavioral equivalence of this class of mechanisms under different values of α. Even though the procedure and environment do not change across auctions, we do not observe the same bidding behavior across these strategically-equivalent mechanisms. Our research can inform mechanism design literature with respect to the design of optimal mechanisms. Copyright Springer-Verlag 2012

Suggested Citation

  • 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.
  • Handle: RePEc:spr:reecde:v:16:y:2012:i:2:p:159-173
    DOI: 10.1007/s10058-012-0123-9
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    References listed on IDEAS

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    2. Engelmann, Dirk & Grüner, Hans Peter, 2013. "Tailored Bayesian Mechanisms: Experimental Evidence from Two-Stage Voting Games," CEPR Discussion Papers 9544, C.E.P.R. Discussion Papers.
    3. Antonio FILIPPIN & Paolo CROSETTO, 2014. "A Reconsideration of Gender Differences in Risk Attitudes," Departmental Working Papers 2014-01, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.

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    More about this item

    Keywords

    Mechanism design; Auction; Laboratory experiment; C92; D02; D03; D44;
    All these keywords.

    JEL classification:

    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • D02 - Microeconomics - - General - - - Institutions: Design, Formation, Operations, and Impact
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions

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