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Articles 1 - 16 of 16
Full-Text Articles in Social and Behavioral Sciences
Ambiguity And Ambiguity Attitudes Across Auctions, Cary Deck, Paan Jindapon, Tigran Melkonyan, Mark Schneider
Ambiguity And Ambiguity Attitudes Across Auctions, Cary Deck, Paan Jindapon, Tigran Melkonyan, Mark Schneider
ESI Working Papers
Studies of ambiguity perceptions and attitudes are moving beyond the Ellsberg urn to examine people’s responses to ambiguity in naturally occurring events, games, and financial markets. In this study, we measure ambiguity perceptions and attitudes for market prices and allocations in four classical auction formats (first-price and second-price sealed bid auctions, English and Dutch clock auctions). We find ambiguity attitudes, representing individual preferences, are stable across auctions. However, the perceived ambiguity surrounding auction prices is lowest for English clock auctions which are obviously strategyproof (OSP), followed by second-price auctions which are strategyproof (SP), followed by a tie between first-price and …
Opportunity Cost, Inattention And The Bidder's Curse, David J. Freeman, Erik O. Kimbrough, J. Philipp Reiss
Opportunity Cost, Inattention And The Bidder's Curse, David J. Freeman, Erik O. Kimbrough, J. Philipp Reiss
Economics Faculty Articles and Research
Auction winners sometimes suffer a “bidder’s curse”, paying more for an item at auction than the fixed price charged for an identical item by other sellers. This seemingly irrational behavior is puzzling because the information necessary to avoid overpaying would appear to be readily available to bidders, yet they seem to ignore it. To understand this behavior, we consider the bidders’ decisions whether to acquire information about the fixed price before bidding, in the presence of opportunity costs. Our theory introduces costly information acquisition into an auction model, with a fixed price aftermarket selling an identical good. When information about …
A Computational And Experimental Examination Of The Fcc Incentive Auction, Logan Gantner
A Computational And Experimental Examination Of The Fcc Incentive Auction, Logan Gantner
Computational and Data Sciences (PhD) Dissertations
In 2016, the Federal Communications Commission debuted a new auction mechanism, the Incentive Auction, with the intention of obtaining high frequency television broadcasting spectrum, repurposing it for cellular use, and reselling these licenses at profitable prices. In designing this process, the traditional mechanism used for spectrum auctions, the Simulta- neous Multiple Round Auction (SMR), was modified in order to speed the process. This new mechanism, the Incentive Forward Auction (IFA), intended to reduce the number of rounds per auction by lumping similar spectrum licenses together. However, the IFA discourages straightforward bidding strategies and can result in bidders committing more in …
Informed Entry In Auctions, Diego Aycinena, Hernán Bejerano, Lucas Rentschler
Informed Entry In Auctions, Diego Aycinena, Hernán Bejerano, Lucas Rentschler
ESI Publications
We examine entry decisions in first-price and English clock auctions with participation costs. Potential bidders observe their value and report maximum willingness to pay (WTP) to participate. Entry occurs if revealed WTP (weakly) exceeds the randomly drawn participation cost. We find no difference in WTP between auction formats, although males have a higher WTP for first-price auctions. WTP is decreasing in the number of potential bidders, but this reduction is less than predicted and small in magnitude.
Information Effects In Uniform Price Multi-Unit Dutch Auctions, Joy A. Buchanan, Steven Gjerstad, David Porter
Information Effects In Uniform Price Multi-Unit Dutch Auctions, Joy A. Buchanan, Steven Gjerstad, David Porter
Economics Faculty Articles and Research
We design a multi-unit descending-price (Dutch) auction mechanism that has applications for resource allocation and pricing problems. We address specific auction design choices by theoretically and experimentally determining optimal information disclosure along two dimensions. Bidders are either informed of the number of bidders in the auction, or know that it is one of two possible sizes; they also either know the number of units remaining for sale or are unaware of how many units have been taken by other bidders. We find that revealing group size decreases bids, and therefore revenue, if units remaining are not shown. When group size …
Are Subjects Making Financial Decisions In Lab Auctions Or Are They Just Gambling?, Cary Deck, Jungmin Lee, Javier Reyes
Are Subjects Making Financial Decisions In Lab Auctions Or Are They Just Gambling?, Cary Deck, Jungmin Lee, Javier Reyes
Economics Faculty Articles and Research
Optimal bidding strategies in first-price and Dutch auctions are theoretically isomorphic but depend on bidder risk attitudes. However, laboratory experiments consistently find different behaviour between auction formats. This article explores whether the notion in psychology that financial and gambling risks are viewed differently can explain the discrepancy. Ultimately, the evidence does not support this hypothesis, but a bidder's propensity to gamble is associated with how much risk he takes in both auctions whereas his propensity to take financial risks is not. The results suggest that subjects may view themselves as gambling in laboratory auctions rather than making financial decisions.
Horizontal Product Differentiation In Auctions And Multilateral Negotiations, Charles J. Thomas, Bart J. Wilson
Horizontal Product Differentiation In Auctions And Multilateral Negotiations, Charles J. Thomas, Bart J. Wilson
Economics Faculty Articles and Research
We experimentally compare first-price auctions and multilateral negotiations after introducing horizontal product differentiation into a standard procurement setting. Both institutions yield identical surplus for the buyer, a difference from prior findings with homogeneous products that results from differentiation's influence on sellers' pricing behaviour. The data are consistent with this finding being driven by concessions from low-cost sellers in response to differentiation reducing their likelihood of being the buyer's surplus-maximizing trading partner. Further analysis shows that introducing product differentiation increases the intensity of price competition among sellers, which contrasts with the conventional wisdom that product differentiation softens competition.
The Herodotus Paradox, Michael R. Baye, Dan Kovenock, Casper G. De Vries
The Herodotus Paradox, Michael R. Baye, Dan Kovenock, Casper G. De Vries
Economics Faculty Articles and Research
The Babylonian bridal auction, described by Herodotus, is regarded as one of the earliest uses of an auction in history. Yet, to our knowledge, the literature lacks a formal equilibrium analysis of this auction. We provide such an analysis for the two-player case with complete and incomplete information, and in so doing identify what we call the 'Herodotus paradox.'
Information Effects In Multi-Unit Dutch Auctions, Joy A. Buchanan, Steven Gjerstad, David Porter
Information Effects In Multi-Unit Dutch Auctions, Joy A. Buchanan, Steven Gjerstad, David Porter
ESI Working Papers
We design a multi-unit descending-price (Dutch) auction mechanism that has applications for resource allocation and pricing problems. We address specific auction design choices by theoretically and experimentally determining optimal information disclosure along two dimensions. Bidders are either informed of the number of bidders in the auction, or know that it is one of two possible sizes; they also either know the number of units remaining for sale or are unaware of how many units have been taken by other bidders. We find that revealing group size decreases bids, and therefore revenue, if units remaining are not shown. When group size …
Radio Spectrum And The Disruptive Clarity Of Ronald Coase, Thomas W. Hazlett, David P. Porter, Vernon L. Smith
Radio Spectrum And The Disruptive Clarity Of Ronald Coase, Thomas W. Hazlett, David P. Porter, Vernon L. Smith
Economics Faculty Articles and Research
In the Federal Communications Commission, Ronald Coase exposed deep foundations via normative argument buttressed by astute historical observation. The government controlled scarce frequencies, issuing sharply limited use rights. Spillovers were said to be otherwise endemic. Coase saw that Government limited conflicts by restricting uses; property owners perform an analogous function via the “price system.” The government solution was inefficient unless the net benefits of the alternative property regime were lower. Coase augured that the price system would outperform. His spectrum auction proposal was mocked by communications policy experts, opposed by industry interests, and ridiculed by policy makers. Hence, it took …
Personality And The Consistency Of Risk Taking Behavior: Experimental Evidence, Cary Deck, Jungmin Lee, Javier Reyes
Personality And The Consistency Of Risk Taking Behavior: Experimental Evidence, Cary Deck, Jungmin Lee, Javier Reyes
ESI Working Papers
Researchers have found that an individual’s risk attitude is not stable across elicitation methods. Results reported by Deck et al. (2009) suggest that personality may help explain the apparent inconsistency, offering support to Borghans et al.’s (2008) argument that economists should consider a multi‐domain approach to measuring risk attitudes. This paper uses laboratory methods to compare risk attitudes as measured by the Holt and Laury (2002) procedure under two different frames. We find that, as in Deck et al. (2009), one’s willingness to take financial risks (as measured by Weber et al. 2002) significantly affects behavior; however the effect is …
Auction Markets For Evaluations, Cary Deck, Bart J. Wilson
Auction Markets For Evaluations, Cary Deck, Bart J. Wilson
Economics Faculty Articles and Research
When the value of a product or service is uncertain, outcomes can be inefficient. A market for evaluations can theoretically increase efficiency by voluntarily eliciting an evaluation that would otherwise not be provided. This paper uses a controlled laboratory experiment to test the performance of four market mechanisms to provide product evaluations. The mechanisms considered are derived from the oft studied uniform price sealed bid, discriminatory price sealed bid, English clock auction, and Dutch clock auction. Our results indicate for this nonrivalrous product that (i) each of these institutions improves social welfare and (ii) the performances of the four mechanisms …
A Comparison Of Auctions And Multilateral Negotiations, Charles J. Thomas, Bart J. Wilson
A Comparison Of Auctions And Multilateral Negotiations, Charles J. Thomas, Bart J. Wilson
Economics Faculty Articles and Research
We compare first-price auctions to an exchange process that we term 'multilateral negotiations.' In multilateral negotiations, a buyer solicits price offers for a homogeneous product from sellers with privately known costs, and then plays the sellers off one another to obtain additional price concessions. Using the experimental method, we find that with four sellers, transaction prices are statistically indistinguishable in the two institutions, but with two sellers, prices are higher in multilateral negotiations than in first-price auctions. The institutions are equally efficient with two sellers, but multilateral negotiations are slightly more efficient with four sellers.
The All-Pay Auction With Complete Information, Michael R. Baye, Dan Kovenock, Casper G. De Vries
The All-Pay Auction With Complete Information, Michael R. Baye, Dan Kovenock, Casper G. De Vries
Economics Faculty Articles and Research
In a (first price) all-pay auction, bidders simultaneously submit bids for an item. All players forfeit their bids, and the high bidder receives the item. This auction is widely used in economics to model rent seeking, R&D races, political contests, and job promotion tournaments. We fully characterize equilibrium for this class of games, and show that the set of equilibria is much larger than has been recognized in the literature. When there are more than two players, for instance, we show that even when the auction is symmetric there exists a continuum of asymmetric equilibria. Moreover, for economically important configurations …
Experimental Studies Of Discrimination Versus Competition In Sealed Bid Auction Markets, Vernon L. Smith
Experimental Studies Of Discrimination Versus Competition In Sealed Bid Auction Markets, Vernon L. Smith
Economics Faculty Articles and Research
In this study, attention focuses on the behavior of a class of auction markets where formal organization requires the individual competing bidders to submit one or more written "sealed bids" specifying the quantity and price at which they are committed to buy (or sell) units of the item being traded.
Experimental Auction Markets And The Walrasian Hypothesis, Vernon L. Smith
Experimental Auction Markets And The Walrasian Hypothesis, Vernon L. Smith
Economics Faculty Articles and Research
This study reports on a block of experimental market sessions designed primarily to provide (1) the severest test yet attempted of the equilibrating forces operating in competitive auction markets and (2) a more rigorously controlled test of the Walrasian hypothesis. Some data are also supplied which show the effect of cash payoffs on the equilibrating behavior of such markets; in particular, the effect of full cash payoffs to all successful trading subjects as against payoffs to a subset of such subjects chosen at random.