A novel experimental test of truthful bidding in second-price auctions with real objects

Rosato, Antonio and Tymula, Agnieszka (2022): A novel experimental test of truthful bidding in second-price auctions with real objects.

Abstract

We present experimental evidence on bidding in second-price auctions with real objects. Our novel design, combining a second-price auction with an individual-specific binary choice task based on the outcome of the auction, allows us to directly identify over and under-bidding. We analyze bidding in real-object and induced-value auctions, and find significant deviations from truthful bidding in both. Overall, under-bidding is somewhat more prevalent than over-bidding; yet, the latter has a bigger magnitude, especially with induced values. At the individual level, we find no relation between the tendency to deviate from truthful bidding in induced-value vs. real-object auctions.

• Item Type: MPRA Paper
• Language: English
• Keywords: second-price auctions; overbidding; consumer surplus
• Subjects: D - Microeconomics > D4 - Market Structure, Pricing, and Design > D44 - Auctions; D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D81 - Criteria for Decision-Making under Risk and Uncertainty; D - Microeconomics > D9 - Intertemporal Choice > D91 - Intertemporal Household Choice ; Life Cycle Models and Saving; D - Microeconomics > D9 - Intertemporal Choice > D92 - Intertemporal Firm Choice, Investment, Capacity, and Financing

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