Allotment in first-price auctions: an experimental investigation
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We experimentally study the effects of allotment—the division of an item into homogeneous units—in independent private value auctions. We compare a bundling first-price auction with two equivalent treatments where allotment is implemented: a two-unit discriminatory auction and two simultaneous single-unit first-price auctions. We find that allotment in the form of a discriminatory auction generates a loss of efficiency with respect to bundling. In the allotment treatments, we observe large and persistent bid spread, and the discriminatory auction is less efficient than simultaneous auctions. We provide a unified interpretation of our results that is based on both a non-equilibrium response to the coordination problem characterizing the simultaneous auction format and a general class of behavioral preferences that includes risk aversion, joy of winning and loser’s regret as specific cases.
KeywordsAllotment Multi-unit auction Discriminatory auction First-price auction Laboratory experiment
JEL ClassificationH57 D44
We are indebted to Giancarlo Spagnolo, Ted Turocy, two anonymous referees and the editor, David Cooper, for fruitful suggestions. We thank Thomas Bassetti, Paolo Bertoletti, Maria Bigoni, Ottorino Chillemi, Christopher Cotton, Dirk Engelmann, Jose-Antonio Espin-Sanchez, Carlos Alós-Ferrer, Oscar Mitnik, Luigi Moretti, Marco Pagnozzi, Alexander Rasch, Achim Wambach and participants at the PRIN Workshop in Capri, the XXVII Jornadas de Economia Industrial in Murcia, the Economics Department Seminar in Pavia, the 2012 ASSET Conference in Cyprus and the seminars at the Chaire EPPP-Paris 1, Pantheon Sorbonne, the “Design and Behavior” group of the University of Cologne, the PET 13 - International meeting of the Association for Public Economic Theory, for their comments. Financial support from the Centro Studi di Economia e Tecnica dell'Energia "Giorgio Levi Cases" - University of Padova, the Italian Ministry of Education (PRIN N.20089PYFHY_002) and the Austrian Science Fund (FWF-Project S 103070-G14) is gratefully acknowledged. All errors are ours.
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