An Experimental Study on Sequential Auctions with Privately Known Capacities

Luca Corrazzini (), Stefano Galavotti () and Paola Valbonesi
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Luca Corrazzini: Department of Economics, University Of Venice CÃ Foscari; ISLA, Bocconi University, Milan
Authors registered in the RePEc Author Service: Luca Corazzini

No 2017:30, Working Papers from Department of Economics, University of Venice "Ca' Foscari"

Abstract: We experimentally study bidding behavior in sequential first-price procurement auctions where bidders' capacity constraints are private information. Treatment differs in the ex-ante probability distribution of sellers' capacities and in the (exogenous) probability that the second auction is actually implemented. Our results show that: (i) bidding behavior in the second auction conforms with sequential rationality; (ii) while first auction's bids negatively depend on capacity, bidders seem unable to recognize this link when, at the end of the first auction, they state their beliefs on the opponent's capacity. To rationalize this inconsistency between bids and beliefs, we conjecture that bidding in the first auction is also affected by a hidden, behavioral type – related to the strategic sophistication of bidders – that obfuscates the link between capacity and bids. Building on this intuition, we show that a simple level-k model may help explain the inconsistency.

Keywords: Sequential auctions; capacity constraints; belief inconsistency (search for similar items in EconPapers)
JEL-codes: D44 D91 H57 (search for similar items in EconPapers)
Pages: 44 pages
Date: 2017
New Economics Papers: this item is included in nep-des, nep-exp and nep-reg
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Related works:
Journal Article: An experimental study on sequential auctions with privately known capacities (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:ven:wpaper:2017:30

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