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Bidding Behavior In Multi-Unit Auctions - An Experimental Investigation And Some Theoretical Insights

  • Dirk Engelmann

    ()

    (CERGE-EI)

  • Veronika Grimm

    ()

    (Universidad de Alicante)

We present laboratory experiments of five different multi-unit auction mechanisms. Two units of a homogeneous object were auctioned off among two bidders with flat demand for two units. We test whether expected demand reduction occurs in open and sealed-bid uniform-price auctions. Revenue equivalence is tested for these auctions as well as for the Ausubel, the Vickrey and the discriminatory sealed-bid auction. Furthermore, we compare the five mechanisms with respect to the efficient allocation of the units. We also provide some theoretical insights concerning the equilibria of uniform-price auctions with incomplete information.

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Paper provided by Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) in its series Working Papers. Serie AD with number 2004-12.

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Length: 55 pages
Date of creation: Mar 2004
Date of revision:
Publication status: Published by Ivie
Handle: RePEc:ivi:wpasad:2004-12
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  1. Gary Charness & Matthew Rabin, 2003. "Understanding Social Preferences with Simple Tests," General Economics and Teaching 0303002, EconWPA.
  2. 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.
  3. Edward Clarke, 1971. "Multipart pricing of public goods," Public Choice, Springer, vol. 11(1), pages 17-33, September.
  4. David Reiley & John List & Richard Engelbrecht-Wiggans, 2004. "Demand reduction in a multi-unit auctions with varying numbers of bidders: Theory and evidence from a field experiment," Framed Field Experiments 00147, The Field Experiments Website.
  5. Matthew Rabin, 2000. "Risk Aversion and Expected-Utility Theory: A Calibration Theorem," Econometrica, Econometric Society, vol. 68(5), pages 1281-1292, September.
  6. Veronika Grimm & Frank Riedel & Elmar G. Wolfstetter, 2001. "Low Price Equilibrium in Multi-Unit Auctions: The GSM Spectrum Auction in Germany," CESifo Working Paper Series 506, CESifo Group Munich.
  7. David Reiley & John List, 2008. "Field experiments," Artefactual Field Experiments 00091, The Field Experiments Website.
  8. 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.
  9. Kreps, David M & Wilson, Robert, 1982. "Sequential Equilibria," Econometrica, Econometric Society, vol. 50(4), pages 863-94, July.
  10. Richard Engelbrecht-Wiggans & Charles M. Kahn, 1998. "Multi-unit auctions with uniform prices," Economic Theory, Springer, vol. 12(2), pages 227-258.
  11. Alsemgeest, Paul & Noussair, Charles & Olson, Mark, 1998. "Experimental Comparisons of Auctions under Single- and Multi-Unit Demand," Economic Inquiry, Western Economic Association International, vol. 36(1), pages 87-97, January.
  12. 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.
  13. Madrigal, Vicente & Tan, Tommy C. C. & Werlang, Sergio Ribeiro da Costa, 1987. "Support restrictions and sequential equilibria," Journal of Economic Theory, Elsevier, vol. 43(2), pages 329-334, December.
  14. David Porter & Roumen Vragov, 2006. "An experimental examination of demand reduction in multi-unit versions of the Uniform-price, Vickrey, and English auctions," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 27(6), pages 445-458.
  15. Groves, Theodore, 1973. "Incentives in Teams," Econometrica, Econometric Society, vol. 41(4), pages 617-31, July.
  16. Georg Nöldeke & Eric van Damme, 1990. "Switching Away From Probability One Beliefs," Discussion Paper Serie A 304, University of Bonn, Germany.
  17. 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.
  18. 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.
  19. Dirk Engelmann & Martin Strobel, 2004. "Inequality Aversion, Efficiency, and Maximin Preferences in Simple Distribution Experiments," American Economic Review, American Economic Association, vol. 94(4), pages 857-869, September.
  20. Lawrence M. Ausubel & Peter Cramton, 1995. "Demand Reduction and Inefficiency in Multi-Unit Auctions," Papers of Peter Cramton 98wpdr, University of Maryland, Department of Economics - Peter Cramton, revised 22 Jul 2002.
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