Review of Economic Design

, Volume 16, Issue 2–3, pp 119–134 | Cite as

Fear of losing in a clock auction

  • Peter Cramton
  • Emel Filiz-Ozbay
  • Erkut Y. Ozbay
  • Pacharasut Sujarittanonta
Original Paper

Abstract

We examine bidding behavior in a clock auction in which price is set by the lowest-accepted bid and provisional winners are reported each round (the LABpw auction). This format was used in the India 3G spectrum auction. In the standard theory, the auction performs poorly. In particular it yields lower revenues and is less efficient than the more standard clock auction with exit bids and highest-rejected-bid pricing (the HRB auction). However, the LABpw auction performs well in the lab, achieving higher revenues than the HRB auction. We show how fear of losing provides one motivation for the overbidding that causes higher revenues in the LABpw auction.

Keywords

Clock auction Regret Lowest accepted bid Provisional winner 

JEL Classification

D44 C78 L96 

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Copyright information

© Springer-Verlag 2012

Authors and Affiliations

  • Peter Cramton
    • 1
  • Emel Filiz-Ozbay
    • 1
  • Erkut Y. Ozbay
    • 1
  • Pacharasut Sujarittanonta
    • 1
  1. 1.Department of EconomicsUniversity of MarylandCollege ParkUSA

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