Credibility in second-price auctions: an experimental test

Ahrash Dianat () and Mikhail Freer ()
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Ahrash Dianat: University of Essex
Mikhail Freer: University of Essex

Experimental Economics, 2024, vol. 27, issue 1, No 4, 58-79

Abstract: Abstract We provide the first direct test of how the credibility of an auction format affects bidding behavior and final outcomes. To do so, we conduct a series of laboratory experiments where the role of the seller is played by a human subject who receives the revenue from the auction and who (depending on the treatment) has agency to determine the outcome of the auction. Contrary to theoretical predictions, we find that the non-credible second-price auction fails to converge to the first-price auction. We provide a behavioral explanation for our results based on sellers’ aversion to rule-breaking, which is confirmed by an additional experiment.

Keywords: Auctions; Mechanism design; Experiments (search for similar items in EconPapers)
JEL-codes: C90 D44 D90 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1007/s10683-023-09802-0

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