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Competition and cooperation in divisible good auctions: An experimental examination

  • Charles Schnitzlein
  • Jaime Zender
  • Orly Sade
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    An experimental approach is used to examine the performance of three different multi-unit auction designs: discriminatory, uniform-price with fixed supply, and uniform-price with endogenous supply. We find that the strategies of the individual bidders and the aggregate demand curves are inconsistent with theoretically identified equilibrium strategies. The discriminatory auction is found to be more susceptible to collusion than are the uniform-price auctions, and so contrary to theoretical predictions and previous experimental results the discriminatory auction provides the lowest average revenue. Consistent with theoretical predictions, bidder demands are more elastic with reducible supply or discriminatory pricing than in the uniform-price auction with fixed supply. Despite a lack of a priori differences across bidders, the discriminatory auction results in significantly more symmetric allocations.

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    Paper provided by The Field Experiments Website in its series Artefactual Field Experiments with number 00105.

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    Date of creation: 2006
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    Handle: RePEc:feb:artefa:00105
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    1. Kjell G. Nyborg & Ulrich Bindseil & Ilya A. Strebulaev, 2005. "Bidding and Performance in Repo Auctions: Evidence from ECB Open Market Operations," Working Papers 2005.92, Fondazione Eni Enrico Mattei.
    2. Paul Klemperer, 2000. "What Really Matters in Auction Design," Economics Series Working Papers 2000-W26, University of Oxford, Department of Economics.
    3. Leonardo Bartolini & Carlo Cottarelli, 1997. "Designing effective auctions for treasury securities," Current Issues in Economics and Finance, Federal Reserve Bank of New York, vol. 3(Jul).
    4. Gautam Goswami & Thomas Noe & Michael Rebello, 1995. "Collusion in uniform-price auctions: experimental evidence and implications for Treasury auctions," Working Paper 95-5, Federal Reserve Bank of Atlanta.
    5. Back, Kerry & Zender, Jaime F., 2001. "Auctions of divisible goods with endogenous supply," Economics Letters, Elsevier, vol. 73(1), pages 29-34, October.
    6. Keloharju, Matti & Nyborg, Kjell G. & Rydqvist, Kristian, 2004. "Strategic Behavior and Underpricing in Uniform Price Auctions: Evidence from Finnish Treasury Auctions," University of California at Los Angeles, Anderson Graduate School of Management qt6v17p79w, Anderson Graduate School of Management, UCLA.
    7. Back, Kerry & Zender, Jaime F, 1993. "Auctions of Divisible Goods: On the Rationale for the Treasury Experiment," Review of Financial Studies, Society for Financial Studies, vol. 6(4), pages 733-64.
    8. Jegadeesh, Narasimhan, 1993. " Treasury Auction Bids and the Salomon Squeeze," Journal of Finance, American Finance Association, vol. 48(4), pages 1403-19, September.
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