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An experimental examination of demand reduction in multi-unit versions of the Uniform-price, Vickrey, and English auctions

  • David Porter

    (Interdisciplinary Center for Economic Science, George Mason University, USA)

  • Roumen Vragov

    (Baruch College City, University of New York, USA)

Demand reduction in Uniform-price and English auctions are strategic reactions by participants to reduce price and thus increase potential profits. Laboratory experiments similar to the field experiments performed by List and Reiley (Am. Econ. Rev. 2000; 9 (4): 961-972) in which two individuals with demands for two units vie for two units through a Uniform-price, English or Vickrey auction are conducted. We find strong support for demand reduction in both the English and Uniform-price auctions, with significantly more dramatic reductions in the English auction. However, there is significant overbidding in both the Vickrey and Uniform-price auction. This overbidding solves a puzzle found by List and Reiley in their field experiment data. Copyright © 2006 John Wiley & Sons, Ltd.

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Article provided by John Wiley & Sons, Ltd. in its journal Managerial and Decision Economics.

Volume (Year): 27 (2006)
Issue (Month): 6 ()
Pages: 445-458

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Handle: RePEc:wly:mgtdec:v:27:y:2006:i:6:p:445-458
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  1. John A. List & David Lucking-Reiley, 2000. "Bidding Behavior and Decision Costs in Field Experiments," Vanderbilt University Department of Economics Working Papers 0006, Vanderbilt University Department of Economics.
  2. Lawrence M. Ausubel & Peter Cramton, 1995. "Demand Reduction and Inefficiency in Multi-Unit Auctions," Papers of Peter Cramton 98wpdr, University of Maryland, Department of Economics - Peter Cramton, revised 22 Jul 2002.
  3. 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.
  4. Robert Forsythe & R. Mark Isaac & Thomas R. Palfrey, 1989. "Theories and Tests of "Blind Bidding" in Sealed-Bid Auctions," RAND Journal of Economics, The RAND Corporation, vol. 20(2), pages 214-238, Summer.
  5. Rothkopf, Michael H & Teisberg, Thomas J & Kahn, Edward P, 1990. "Why Are Vickrey Auctions Rare?," Journal of Political Economy, University of Chicago Press, vol. 98(1), pages 94-109, February.
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