An experimental study of VCG mechanism for multi-unit auctions: competing with machine bidders

Satoshi Takahashi (), Yoichi Izunaga () and Naoki Watanabe ()
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Satoshi Takahashi: The University of Electro-Communications
Yoichi Izunaga: Kanagawa University
Naoki Watanabe: Keio University

Evolutionary and Institutional Economics Review, 2022, vol. 19, issue 1, No 4, 97-117

Abstract: Abstract This paper complements the main experimental result reported in Takahashi et al. (Evolut Inst Econ Rev 16:357–374, 2019) to a deeper understanding of subjects’ bidding behavior under the VCG mechanism. In the experiment, there are two types of appearance of information about bidders’ valuations of the item given to them and the bids they are asked to submit: one is unit valuations and the unit bids themselves (Appearance 1) and the other is unit valuations and the unit bids multiplied by the number of units (Appearance 2). For subjects who compete with truth-telling machine bidders in multi-unit auctions, we confirmed that in Appearance 1, they choose truth-telling bids more frequently, and efficient allocations are observed more frequently, as compared to the situation where they compete with human bidders. This result suggests a possibility that in Appearance 1, subjects learn their dominant strategy not by practicing with other subjects but by practicing with machine bidders in experiments for multi-unit auctions, although the item allocation and payment determination under the VCG mechanism is never intuitively understandable to the subjects.

Keywords: Multi-unit auction; VCG mechanism; Experiment; Human and machine bidders; Truth-telling bids (search for similar items in EconPapers)
JEL-codes: C92 D44 D82 (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1007/s40844-021-00198-1

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