Fixed priced plus rationing: An experiment

Veronika Grimm (veronika.grimm@fau.de), Giovanni Ponti (giuba@ua.es) and Jaromír Kovářík

Working Papers. Serie AD from Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie)

Abstract: This paper theoretically and experimentally explores a fixed price mechanism inwhich, if aggregate demand exceeds supply, bidders are proportionally rationed. Ifdemand is uncertain, in equilibrium bidders overstate their true demand in order toalleviate the effects of being rationed. This effect is the more intense the lower theprice, and bids reach their upper limit for sufficiently low prices. In the experiment weobserve a significant proportion of equilibrium play. However, subjects tend to overbidthe equilibrium strategy when prices are low and underbid when prices are high. Weexplain the experimental evidence by a simple model in which the probability of adeviation is decreasing in the expected loss associated with it

Keywords: Fixed price mechanism; rationing; experimental economics (search for similar items in EconPapers)
JEL-codes: C90 D45 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2006-11
New Economics Papers: this item is included in nep-exp
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Published by Ivie

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http://www.ivie.es/downloads/docs/wpasad/wpasad-2006-26.pdf Fisrt version / Primera version, 2006 (application/pdf)

Related works:
Journal Article: Fixed price plus rationing: an experiment (2008)
Working Paper: Fixed price plus rationing: an experiment (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:ivi:wpasad:2006-26

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