A Strategy-Proof Mechanism Should Be Announced to Be Strategy-Proof: An Experiment for the Vickrey Auction

Takehito Masuda, Toyotaka Sakai, Shigehiro Serizawa and Takuma Wakayama

ISER Discussion Paper from Institute of Social and Economic Research, The University of Osaka

Abstract: We conduct laboratory experiments for the multi-unit Vickrey auction with and without providing advice to subjects on strategy-proofness. Although the rate of truth-telling among the subjects stays at 20% without advice, the rate increases to 47% with advice. By conducting similar experiments for the pay-your-bid auction, which is not strategy-proof, we confirm that our results are not due to so-called experimenter demand effects. Moreover, advice improves efficiency in the Vickrey auction, particularly in early periods in which subjects are less experienced. It is well known that subjects tend to overbid in several Vickrey auction experiments. Our results indicate the possibility that simple advice decreases such overbidding by promoting better understanding of the strategy-proofness property in the Vickrey auction. Strategy-proof mechanisms are sometimes criticized because players often fail to find the benefit of truth-telling, but our observations show that introducing advice on the property of strategy-proofness helps them to behave "correctly."

Date: 2019-01, Revised 2019-11
New Economics Papers: this item is included in nep-des and nep-exp
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