Buy or wait, that is the option: the buyer's option in sequential laboratory auctions
Philippe Février (),
Laurent Linnemer () and
Michael Visser ()
Research Unit Working Papers from Laboratoire d'Economie Appliquee, INRA
This paper reports the results from an experiment on two-unit sequential auctions with and without a buyer’s option (which gives the winner of the first auction the right to buy the second unit at the winning price). The demand for the two items is either decreasing, flat, or increasing. The 4 main auction institutions (first-price, Dutch, second-price, English) are studied. We find that observed bidding behavior is close to Nash equilibrium bidding in the auctions for the second unit, but there are substantial deviations in the auctions for the first unit. Despite these deviations, the buyer’s option is correctly used in most cases. The revenue-ranking of the 4 auction institutions is the same as in single-unit experiments. Finally, successive prices are declining when the buyer’s option is available. The last 2 results are used to compare real-life auctions and to discuss the findings in related field-data studies.
Keywords: experimental economics; sequential auctions; buyer's option (search for similar items in EconPapers)
JEL-codes: C91 D44 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-exp
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Journal Article: Buy or wait, that is the option: the buyer's option in sequential laboratory auctions (2007)
Working Paper: Buy or Wait, That is the Option. The Buyer’s Option in Sequential Laboratory Auctions (2001)
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Persistent link: https://EconPapers.repec.org/RePEc:lea:leawpi:0410
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