Fixed price plus rationing: an experiment

Veronika Grimm (), Jaromír Kovářík and Giovanni Ponti ()

No 2005039, LIDAM Discussion Papers CORE from Université catholique de Louvain, Center for Operations Research and Econometrics (CORE)

Abstract: This paper explores, theoretically and experimentally, a fixed-price mechanism bywhich, if aggregate demand exceeds supply, bidders are proportionally rationed. Ifdemand is uncertain, equilibrium consists in overstating true demand to alleviate theeffects of being rationed. Overstating is more intense the lower the price, with bidsreaching their upper limit for sufficiently low prices. In the experiment, despite of asignificant proportion of equilibrium play, subjects tend to (under)overbid the equilibriumstrategy when rationing is (high) low, with only this latter effect being persistentover time. We explain the experimental evidence by a simple model in which theprobability of a deviation is decreasing in the expected loss associated with it.

Keywords: fixed price mechanism; rationing; experimental economics (search for similar items in EconPapers)
JEL-codes: C90 D45 (search for similar items in EconPapers)
Date: 2005-06
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Fixed price plus rationing: an experiment (2008)
Working Paper: Fixed priced plus rationing: An experiment (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:cor:louvco:2005039

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