Entry by Successful Speculators in Auctions with Resale

Pagnozzi, Marco and Saral, Krista J. (2016): Entry by Successful Speculators in Auctions with Resale.

Abstract

We experimentally analyze the role of speculators, who have no use value for the objects on sale, in auctions. The environment is a uniform-price sealed-bid auction for 2 identical objects, followed by a free-form bargaining resale market. There is always one positive-value bidder, and either one to two speculators who may choose whether to enter the auction. We show that the bidder accommodates speculators by reducing demand in the auction and subsequently purchasing in the resale market, which encourages entry by speculators. The presence of multiple speculators induces each speculator to enter less often, but increases competition in the auction and the auction price. Speculators earn positive profits on average, except when multiple speculators enter the auction

• Item Type: MPRA Paper
• Language: English
• Keywords: speculators, entry, multi-object auctions, resale, economic experiments
• Subjects: C - Mathematical and Quantitative Methods > C9 - Design of Experiments > C90 - General; D - Microeconomics > D4 - Market Structure, Pricing, and Design > D44 - Auctions

References

Ausubel, L., and P. Cramton (1998), "Demand Reductions and Inefficiency in Multi-Unit Auctions." Mimeo, University of Maryland.

Ausubel, L., P. Cramton, and R. Deneckere (2002), "Bargaining with Incomplete Information," in Handbook of Game Theory, Vol. 3 (ed. by R. Aumann and S. Hart). Amsterdam: Elsevier.

Chintamani, J. and G. Kosmopoulou (2015), "Auctions with Resale Opportunities: An Experimental Study." Economic Inquiry, 53, 624-639.

Eckel, C., and P. Grossman (2008), "Forecasting Risk Attitudes: An Experimental Study Using Actual and Forecast Gamble Choices." Journal of Economic Behavior and Organization, 68 (1), 1-17.

Engelmann, D., and V. Grimm (2009), "Bidding Behavior in Multi-Unit Auctions -- An Experimental Investigation." Economic Journal, 119, 855-882.

Filiz-Ozbay, E., K. Lopez-Vargas and E. Ozbay (2015), "Multi-Object Auctions with Resale: Theory and Experiment." Games and Economic Behavior, 89, 1-16.

Fischbacher, U. (2007) "Z-Tree: Zurich Toolbox For Readymade Economic Experiments." Experimental Economics, 10(2), 171-178.

Garratt, R., and T. Tröger (2006), "Speculation in Standard Auctions with Resale." Econometrica, 74(3), 753-769.

Georganas, S. (2011), "English Auctions with Resale: An Experimental Study." Games and Economic Behavior, 73(1), 147-166

Georganas, S., and J. Kagel (2011), "Asymmetric Auctions with Resale: An Experimental Study." Journal of Economic Theory, 146, 359-371.

Greiner, B. (2004), "The Online Recruitment System ORSEE 2.0 -- A Guide for the Organization of Experiments in Economics." University of Cologne, Working Paper n. 10.

Kagel, J., and D. Levin (2001), "Behavior in Multi-Unit Demand Auctions: Experiments with Uniform Price and Dynamic Vickrey Auctions." Econometrica, 69, 413-454.

Kagel, J., and D. Levin (2011), "Auctions: A Survey of Experimental Research, 1995-2010." forthcoming in The Handbook of Experimental Economics, Vol. 2 (ed. by A. Roth and J. Kagel). Princeton: Princeton University Press.

Lange, A., J. List and M. Price (2011), "Auctions with Resale when Private Values Are Uncertain: Theory and Empirical Evidence." International Journal of Industrial Organization, 29, 54-64.

Mougeot, M., Naegelen, F., Pelloux, B., and Rulliere, J. (2011), "Breaking Collusion in Auctions through Speculation: An Experiment on CO2 Emission Permit Markets." Journal of Public Economic Theory, 13(5), 829-856.

Murnighan, J., and Roth, A. (1977), "The Effects of Communication and Information Availability in an Experimental Study of a Three-Person Game." Management Science, 23(12), 1336-1348.

Pagnozzi, M. (2010), "Are Speculators Unwelcome in Multi-Object Auctions?" American Economic Journal: Microeconomics, 2(2), 97-131.

Pagnozzi, M., and K. J. Saral (2015), "Efficiency in Auctions with (Failed) Resale." Mimeo, Università di Napoli Federico II.

Pagnozzi, M., and K. J. Saral (2016), "Demand Reduction in Multi-Object Auctions with Resale: An Experimental Analysis." Economic Journal, forthcoming.

Saral, K. J. (2012), "Speculation and Demand Reduction in English Clock Auctions with Resale." Journal of Economic Behavior and Organization, 84(1), 416-431.

Wilson, R. (1979), "Auctions of Shares." Quarterly Journal of Economics, 94, 675-689 Xu, X., Levin, D., and Ye, L. (2013), "Auctions with Entry and Resale." Games and Economic Behavior, 79, 92-105.