sequential auctions with capacity constraints: an experimental investigation

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ID: 190671
2018
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Abstract
We conduct a laboratory experiment where groups of 4 subjects constrained to obtain at most one good each, sequentially bid for three goods in first and second price auctions. Subjects learn at the beginning of each auction their valuation for the good and exit the auction once they have obtained one good. We show that, contrary to equilibrium predictions, subjects’ bidding behavior is excessively similar across units and across mechanisms at the aggregate level. We provide two (complementary) explanations for these departures. One is bounded rationality. Subjects do not fully comprehend subtle differences between mechanisms. The other is self-selection. Subjects are very heterogeneous and some of them deviate more from equilibrium than others. Since deviations take mostly the form of overbidding, these subjects win the first or second good and exit the auction, leaving those who play closer to theoretical predictions to bid for the third good. Support for this hypothesis comes from the documented higher bidding, lower efficiency and lower profits associated with the first and second unit compared to the third one.
Reference Key
otamendi2018gamessequential Use this key to autocite in the manuscript while using SciMatic Manuscript Manager or Thesis Manager
Authors ;F. Javier Otamendi;Isabelle Brocas;Juan D. Carrillo
Journal journal of macromolecular science, part c
Year 2018
DOI
10.3390/g9010015
URL
http://www.mdpi.com/2073-4336/9/1/15
Keywords
overbidding selection

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