Entry by successful speculators in auctions with resale
- 201 Downloads
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, with one positive-value bidder, and either one or two speculators who may choose simultaneously 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.
KeywordsSpeculators Entry Multi-object auctions Resale Economic experiments
JEL ClassificationD44 C90
We would like to thank the editor and the referees for extremely helpful suggestions, as well as seminar participants at the 2014 ESA Ft. Lauderdale meeting, the LabSi Lab2 Workshop, the EARIE 2016 Conference, and the universities of Innsbruck and St. Gallen. We would also like to thank Philip Brookins for research assistance, members of the xs/fs group for use of the laboratory at Florida State University, and the International Foundation for Research in Experimental Economics (IFREE) for funding this Project.
- Ausubel, L., & Cramton, P. (1998). Demand reductions and inefficiency in multi-unit auctions. Mimeo: University of Maryland.Google Scholar
- Ausubel, L., Cramton, P., & Deneckere, R. (2002). Bargaining with incomplete information. In R. Aumann & S. Hart (Eds.), Handbook of game theory (Vol. 3). Amsterdam: Elsevier.Google Scholar
- Garratt, R., & Georganas, S. (2017). Auctions with speculators: An experimental study. Mimeo: City University London.Google Scholar
- Greiner, B. (2004) The online recruitment system ORSEE 2.0—A guide for the organization of experiments in economics. Working paper n. 10, University of Cologne.Google Scholar
- Kagel, J., & Levin, D. (2011). Auctions: A survey of experimental research. In A. Roth & J. Kagel (Eds.), The handbook of experimental economics (Vol. 2, pp. 1995–2010). Princeton: Princeton University Press.Google Scholar
- Pagnozzi, M. (2010). Are speculators unwelcome in multi-object auctions? American Economic Journal: Microeconomics, 2(2), 97–131.Google Scholar
- Pagnozzi, M., & Saral, K. J. (2018). Efficiency in auctions with (failed) resale. Journal of Economic Behavior and Organization, forthcoming.Google Scholar