Bidding at Sequential First-Price Auctions with(out) Supply Uncertainty: A Laboratory Analysis

Tibor Neugebauer and Paul Pezanis-Christou ()

UFAE and IAE Working Papers from Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC)

Abstract: We report on a series of experiments that test the effects of an uncertain supply on the formation of bids and prices in sequential first-price auctions with private-independent values and unit-demands. Supply is assumed uncertain when buyers do not know the exact number of units to be sold (i.e., the length of the sequence). Although we observe a non-monotone behavior when supply is certain and an important overbidding, the data qualitatively support our price trend predictions and the risk neutral Nash equilibrium model of bidding for the last stage of a sequence, whether supply is certain or not. Our study shows that behavior in these markets changes significantly with the presence of an uncertain supply, and that it can be explained by assuming that bidders formulate pessimistic beliefs about the occurrence of another stage.

Keywords: sequential first-price auctions; independent private values; unit-demand; supply uncertainty; bidding behavior; price trends; experimental economics (search for similar items in EconPapers)
JEL-codes: D44 C9 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ind
Date: 2003-02-07
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Persistent link: http://EconPapers.repec.org/RePEc:aub:autbar:558.03

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