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Auctions with Endogenous Price Ceiling:Theoretical and Experimental Results

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  • R'obert F. Vesztegy, Serizawa
  • Kenju Akai
  • Tatsuyoshi Saijo
  • Shigehiro Serizawa

Abstract

This paper analyzes an auction mechanism that excludes overoptimistic bidders inspired by the rules of the procurement auctions adopted by several Japanese local governments. Our theoretical and experimental results suggest that the endogenous exclusion rule reduces the probability of suffering a monetary loss induced by winning the auction, and also mitigates the problem of the winner's curse in the laboratory. However, this protection comes at the price of a lower revenue for the seller.

Suggested Citation

  • R'obert F. Vesztegy, Serizawa & Kenju Akai & Tatsuyoshi Saijo & Shigehiro Serizawa, 2009. "Auctions with Endogenous Price Ceiling:Theoretical and Experimental Results," ISER Discussion Paper 0747, Institute of Social and Economic Research, Osaka University.
  • Handle: RePEc:dpr:wpaper:0747
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    File URL: http://www.iser.osaka-u.ac.jp/library/dp/2009/DP0747.pdf
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    References listed on IDEAS

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    1. Abbink, Klaus & Brandts, Jordi & Pezanis-Christou, Paul, 2006. "Auctions for government securities: A laboratory comparison of uniform, discriminatory and Spanish designs," Journal of Economic Behavior & Organization, Elsevier, vol. 61(2), pages 284-303, October.
    2. Aleix Calveras & Juan-Jose Ganuza & Esther Hauk, 2004. "Wild Bids. Gambling for Resurrection in Procurement Contracts," Journal of Regulatory Economics, Springer, vol. 26(1), pages 41-68, July.
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