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Multi-unit common value auctions: a laboratory experiment with three sealed-bid mechanisms

  • Ahlberg , Joakim



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    This study addresses a discrete common value environment with independent (one-dimensional) private signals, where the seller offers two identical units and the buyers have (flat) demand for both. Each session is conducted with 2, 3 or 4 buyers. Three auction formats are used: the discriminatory, uniform and Vickrey auctions which are all subjected to a variation in the number of bidders and to repeating bid rounds on each subject. The main findings are that there are no significant differences between the uniform and the discriminatory auction in collecting revenue, while the Vickrey auction comes out as inferior. More bidders in the auction result in a greater revenue and level out the performance across the mechanisms. Demand reduction is visible in the experiment, but it is not as prominent as anticipated. Moreover, subjects come closer to equilibrium play over time. Finally, the winner's curse is less severe than what is reported for inexperienced bidders in other studies.

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    Paper provided by CTS - Centre for Transport Studies Stockholm (KTH and VTI) in its series Working papers in Transport Economics with number 2012:23.

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    Length: 37 pages
    Date of creation: 05 Nov 2012
    Date of revision:
    Handle: RePEc:hhs:ctswps:2012_023
    Contact details of provider: Postal: Centrum för Transportstudier (CTS), Teknikringen 10, 100 44 Stockholm, Sweden
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    1. 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.
    2. Noussair, Charles, 1995. "Equilibria in a Multi-object Uniform Price Sealed Bid Auction with Multi-unit Demands," Economic Theory, Springer, vol. 5(2), pages 337-51, March.
    3. Richard Engelbrecht-Wiggans & John A. List & David H. Reiley, 2006. "Demand Reduction In Multi-Unit Auctions With Varying Numbers Of Bidders: Theory And Evidence From A Field Experiment ," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 47(1), pages 203-231, 02.
    4. DavidJ. Cooper & Hanming Fang, 2008. "Understanding Overbidding In Second Price Auctions: An Experimental Study," Economic Journal, Royal Economic Society, vol. 118(532), pages 1572-1595, October.
    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.
    6. David Lucking-Reiley & John A. List, 2000. "Demand Reduction in Multiunit Auctions: Evidence from a Sportscard Field Experiment," American Economic Review, American Economic Association, vol. 90(4), pages 961-972, September.
    7. Richard R. Nelson & Sidney G. Winter, 2002. "Evolutionary Theorizing in Economics," Journal of Economic Perspectives, American Economic Association, vol. 16(2), pages 23-46, Spring.
    8. Dan Levin, 2005. "Demand Reduction in Multi-Unit Auctions: Evidence from a Sportscard Field Experiment: Comment," American Economic Review, American Economic Association, vol. 95(1), pages 467-471, March.
    9. Lawrence M. Ausubel & Peter Cramton & Emel Filiz-Ozbay & Nathaniel Higgins & Erkut Ozbay & Andrew Stocking, 2009. "Common-Value Auctions with Liquidity Needs: An Experimental Test of a Troubled Assets Reverse Auction," Papers of Peter Cramton 09cvawln, University of Maryland, Department of Economics - Peter Cramton, revised 2012.
    10. Dirk Engelmann & Veronika Grimm, 2009. "Bidding Behaviour in Multi-Unit Auctions - An Experimental Investigation," Economic Journal, Royal Economic Society, vol. 119(537), pages 855-882, 04.
    11. Lawrence M. Ausubel, 2004. "An Efficient Ascending-Bid Auction for Multiple Objects," American Economic Review, American Economic Association, vol. 94(5), pages 1452-1475, December.
    12. Richard Engelbrecht-Wiggans & Charles M. Kahn, 1998. "Multi-unit auctions with uniform prices," Economic Theory, Springer, vol. 12(2), pages 227-258.
    13. Manelli, Alejandro M. & Sefton, Martin & Wilner, Benjamin S., 2006. "Multi-unit auctions: A comparison of static and dynamic mechanisms," Journal of Economic Behavior & Organization, Elsevier, vol. 61(2), pages 304-323, October.
    14. 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.
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