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Unique bid auctions: Equilibrium solutions and experimental evidence

  • Rapoport, Amnon
  • Otsubo, Hironori
  • Kim, Bora
  • Stein, William E.

Two types of auction were introduced on the Internet a few years ago and have rapidly been gaining widespread popularity. In both auctions, players compete for an exogenously determined prize by independently choosing an integer in some finite and common strategy space specified by the auctioneer. In the unique lowest (highest) bid auction, the winner of the prize is the player who submits the lowest (highest) bid, provided that it is unique. We construct the symmetric mixed-strategy equilibrium solutions to the two auctions, and then test them in a sequence of experiments that vary the number of bidders and size of the strategy space. Our results show that the aggregate bids, but only a minority of the individual bidders, are accounted for quite accurately by the equilibrium solutions.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 4185.

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Date of creation: 16 Jul 2007
Date of revision: 17 Jul 2007
Handle: RePEc:pra:mprapa:4185
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  1. Theodore Turocy & Elizabeth Watson & Raymond Battalio, 2007. "Framing the first-price auction," Experimental Economics, Springer, vol. 10(1), pages 37-51, March.
  2. Axel Ockenfels & David Reiley & Abdolkarim Sadrieh, 2006. "Online Auctions," NBER Working Papers 12785, National Bureau of Economic Research, Inc.
  3. Rapoport, Amnon & Seale, Darryl A. & Winter, Eyal, 2002. "Coordination and Learning Behavior in Large Groups with Asymmetric Players," Games and Economic Behavior, Elsevier, vol. 39(1), pages 111-136, April.
  4. Darryl Seale & Amnon Rapoport, 2000. "Elicitation of Strategy Profiles in Large Group Coordination Games," Experimental Economics, Springer, vol. 3(2), pages 153-179, October.
  5. Rapoport, Amnon & Stein, William E. & Parco, James E. & Seale, Darryl A., 2004. "Equilibrium play in single-server queues with endogenously determined arrival times," Journal of Economic Behavior & Organization, Elsevier, vol. 55(1), pages 67-91, September.
  6. Ivanova-Stenzel, Radosveta & Sonsino, Doron, 2004. "Comparative study of one-bid versus two-bid auctions," Journal of Economic Behavior & Organization, Elsevier, vol. 54(4), pages 561-583, August.
  7. Raviv, Yaron & Virag, Gabor, 2009. "Gambling by auctions," International Journal of Industrial Organization, Elsevier, vol. 27(3), pages 369-378, May.
  8. Patrick Bajari & Ali Horta�su, 2004. "Economic Insights from Internet Auctions," Journal of Economic Literature, American Economic Association, vol. 42(2), pages 457-486, June.
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