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Empirical bias and efficiency of alpha-auctions: experimental evidence

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  • Alexander L. Brown
  • Rodrigo A. Velez

Abstract

We experimentally evaluate the comparative performance of the winner-bid, average-bid, and loser-bid auctions for the dissolution of a partnership. The analysis of these auctions based on the empirical equilibrium refinement of Velez and Brown (2020) arXiv:1907.12408 reveals that as long as behavior satisfies weak payoff monotonicity, winner-bid and loser-bid auctions necessarily exhibit a form of bias when empirical distributions of play approximate best responses (Velez and Brown, 2020 arXiv:1905.08234). We find support for both weak payoff monotonicity and the form of bias predicted by the theory for these two auctions. Consistently with the theory, the average-bid auction does not exhibit this form of bias. It has lower efficiency that the winner-bid auction, however.

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  • Alexander L. Brown & Rodrigo A. Velez, 2019. "Empirical bias and efficiency of alpha-auctions: experimental evidence," Papers 1905.03876, arXiv.org, revised Jul 2020.
    • Handle: RePEc:arx:papers:1905.03876
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    References listed on IDEAS

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    1. Rodrigo A. Velez & Alexander L. Brown, 2019. "Empirical strategy-proofness," Papers 1907.12408, arXiv.org, revised Jul 2020.

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