Discussion Papers 2016

CIRJE-F-1018

"Auctions For Complements –An Experimental Analysis"

Author Name

Marszalec, Daniel

Date

July 2016

Full Paper

PDF file

Remarks

"Fear not the simplicity - An experimental analysis of auctions for complements" (title revised) , published in Journal of Economic Behavior & Organization, Volume 152, August 2018, Pages 81-97, ISSN 0167-2681, https://doi.org/10.1016/j.jebo.2018.04.023. (https://www.sciencedirect.com/science/article/pii/S0167268118301318).

Abstract

I evaluate the performance of four static sealed-bid package auctions in an experimental setting with complementarities. The valuation model comprises two items, and three bidders: two `local bidders demand one item only, while the third (global) bidder only wants both. The rules I compare include the Vickrey and first-price auctions, Vickrey Nearest Rule and the Reference Rule. Auction-level tests find the first-price auction revenue dominant overall, while the Vickrey auction performs worst; the other two rules rank intermediate. Bidder-level tests of the experimental data reject the competitive equilibrium bidding functions: overbidding is widespread in all four auctions, and bidders are averse to submitting boundary bids. I also observe behaviour consistent with collusive bidding in the Vickrey auction. Contrary to theoretical predictions, the Vickrey auction performs worst on efficiency, primarily for this reason.

Keywords: Auctions, Experimental Economics, Core-Selecting Auctions, Collusion