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The Chopstick Auction: A Study of the Exposure Problem in Multi-Unit Auctions

  • Florian Englmaier
  • Pablo Guillen
  • Loreto Llorente
  • Sander Onderstal
  • Rupert Sausgruber

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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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 1782.

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Date of creation: 2006
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Handle: RePEc:ces:ceswps:_1782
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