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An experimental study on sequential auctions with privately known capacities

Luca Corazzini (), Stefano Galavotti () and Paola Valbonesi ()

Games and Economic Behavior, 2019, vol. 117, issue C, 289-315

Abstract: We experimentally study sequential procurement auctions where bidders' capacity constraints are private information. Our experiment involves two first-price auctions with a belief elicitation stage at the end of the first. Our results show that (i) observed behavior in the second auction is overall consistent with sequential rationality; (ii) first auction bids are decreasing in the capacity of the bidder, but (iii) stated beliefs are inconsistent with the actual play. Hence, subjects seem to be aware of the opportunity cost of early bids (which leads capacity constrained bidders to bid more cautiously than unconstrained ones); on the other hand, since they do not recognize the informative content of bids, the potential signaling cost associated with early bids does not come into play.

Keywords: Sequential auctions; Capacity constraints; Belief updating (search for similar items in EconPapers)
JEL-codes: D44 D91 (search for similar items in EconPapers)
Date: 2019
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Working Paper: An Experimental Study on Sequential Auctions with Privately Known Capacities (2017) Downloads
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DOI: 10.1016/j.geb.2019.06.005

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