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

Tibor Neugebauer and Paul Pezanis-Christou
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Tibor Neugebauer: Leibniz Universität Hannover=Leibniz University Hannover

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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 an important overbidding and a behavior that is nonmonotone in values when supply is certain, 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 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)
Date: 2004
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Published in Journal of Economic Behavior and Organization, 2004, 63 (1), pp.55-72. ⟨10.1016/j.jebo.2005.03.011⟩

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Journal Article: Bidding behavior at sequential first-price auctions with(out) supply uncertainty: A laboratory analysis (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-00279237

DOI: 10.1016/j.jebo.2005.03.011

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