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Bidding Behavior in Multi-Unit Auctions - An Experimental Investigation

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  • Dirk Engelmann
  • Veronika Grimm

Abstract

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.

Suggested Citation

  • Dirk Engelmann & Veronika Grimm, 2006. "Bidding Behavior in Multi-Unit Auctions - An Experimental Investigation," Working Paper Series in Economics 24, University of Cologne, Department of Economics.
  • Handle: RePEc:kls:series:0024
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    References listed on IDEAS

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    1. Richard Engelbrecht-Wiggans & Charles M. Kahn, 1998. "Multi-unit auctions with uniform prices," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 12(2), pages 227-258.
    2. Bernard Lebrun & Marie-Christine Tremblay, 2003. "Multiunit Pay-Your-Bid Auction with One-Dimensional Multiunit Demands," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 44(3), pages 1135-1172, August.
    3. 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 413-454, March.
    4. Goswami, Gautam & Noe, Thomas H & Rebello, Michael J, 1996. "Collusion in Uniform-Price Auctions: Experimental Evidence and Implications for Treasury Auctions," Review of Financial Studies, Society for Financial Studies, vol. 9(3), pages 757-785.
    5. Edward Clarke, 1971. "Multipart pricing of public goods," Public Choice, Springer, vol. 11(1), pages 17-33, September.
    6. Grimm, Veronika & Riedel, Frank & Wolfstetter, Elmar, 2003. "Low price equilibrium in multi-unit auctions: the GSM spectrum auction in Germany," International Journal of Industrial Organization, Elsevier, vol. 21(10), pages 1557-1569, December.
    7. 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.
    8. Groves, Theodore, 1973. "Incentives in Teams," Econometrica, Econometric Society, vol. 41(4), pages 617-631, July.
    9. repec:feb:framed:0052 is not listed on IDEAS
    10. Noussair, Charles, 1995. "Equilibria in a Multi-object Uniform Price Sealed Bid Auction with Multi-unit Demands," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 5(2), pages 337-351, March.
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    Citations

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    Cited by:

    1. Glenn W. Harrison & John A. List, 2004. "Field Experiments," Journal of Economic Literature, American Economic Association, vol. 42(4), pages 1009-1055, December.
    2. Jacob Goeree & Theo Offerman & Randolph Sloof, 2013. "Demand reduction and preemptive bidding in multi-unit license auctions," Experimental Economics, Springer;Economic Science Association, vol. 16(1), pages 52-87, March.
    3. Richard Engelbrecht-Wiggans & John List & David Reiley, 2005. "Demand reduction in a multi-unit auction: Evidence from a sportscard field experiment: Reply," Framed Field Experiments 00146, The Field Experiments Website.
    4. Marco Pagnozzi & Krista Jabs Saral, 2013. "Multi-Object Auctions with Resale: An Experimental Analysis," CSEF Working Papers 328, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
    5. Atakelty Hailu & Sophie Thoyer, 2005. "Multi-Unit Auctions to Allocate Water Scarcity Simulating Bidding Behaviour with Agent Based Models," Others 0512012, EconWPA.
    6. Kagel, John H. & Levin, Dan, 2009. "Implementing efficient multi-object auction institutions: An experimental study of the performance of boundedly rational agents," Games and Economic Behavior, Elsevier, vol. 66(1), pages 221-237, May.
    7. Ping Zhang, 2009. "Characterization of Pure Strategy Equilibria in Uniform Price IPO Auctions," Discussion Papers 2009-05, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham.
    8. Levitt, Steven D. & List, John A., 2009. "Field experiments in economics: The past, the present, and the future," European Economic Review, Elsevier, vol. 53(1), pages 1-18, January.
    9. Martin Sefton & Ping Zhang, 2014. "Divisible-good uniform price auctions: The role of allocation rules and communication among bidders," Research in Experimental Economics,in: Experiments in Financial Economics, volume 16, pages 53-86 Emerald Publishing Ltd.
    10. Ahlberg, Joakim, 2012. "Multi-unit common value auctions: an experimental comparison between the static and the dynamic uniform auction," Working papers in Transport Economics 2012:24, CTS - Centre for Transport Studies Stockholm (KTH and VTI).
    11. Bresky, Michal, 2013. "Revenue and efficiency in multi-unit uniform-price auctions," Games and Economic Behavior, Elsevier, vol. 82(C), pages 205-217.
    12. List John A., 2007. "Field Experiments: A Bridge between Lab and Naturally Occurring Data," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 5(2), pages 1-47, April.
    13. Pagnozzi, Marco & Saral, Krista J., 2016. "Entry by Successful Speculators in Auctions with Resale," MPRA Paper 70022, University Library of Munich, Germany.
    14. Anthony M. Kwasnica & Katerina Sherstyuk, 2013. "Multiunit Auctions," Journal of Economic Surveys, Wiley Blackwell, vol. 27(3), pages 461-490, July.
    15. Atakelty Hailu & Sophie Thoyer, 2010. "What Format for Multi-Unit Multiple-Bid Auctions?," Computational Economics, Springer;Society for Computational Economics, vol. 35(3), pages 189-209, March.
    16. Pagnozzi, Marco & Saral, Krista J., 2015. "Efficiency in Auctions with (Failed) Resale," MPRA Paper 63962, University Library of Munich, Germany.
    17. Ahlberg , Joakim, 2012. "Multi-unit common value auctions: a laboratory experiment with three sealed-bid mechanisms," Working papers in Transport Economics 2012:23, CTS - Centre for Transport Studies Stockholm (KTH and VTI).
    18. Chloé Coq & Henrik Orzen & Sebastian Schwenen, 2017. "Pricing and capacity provision in electricity markets: an experimental study," Journal of Regulatory Economics, Springer, vol. 51(2), pages 123-158, April.

    More about this item

    Keywords

    Multi-Unit Auctions; Demand Reduction; Experimental Economics;

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior

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