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Scale effects in multi-unit auctions

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  • Elskamp, Rebecca
  • Kirkegaard, René

Abstract

We argue that auctions with multi-unit demand can be used to experimentally conduct new and novel tests of auction theory. The focus of the paper is on changes in bidding behavior as the auction is “scaled up” by adding more bidders and increasing both the demand per bidder and supply of the auctioned good. We identify uniquely tractable environments and obtain clear cut theoretical comparative statics in these settings. This leads to the construction of uniform price auctions of different scales where the prediction is that risk neutral bidders' bids on the last unit they demand are independent of scale. In our experiment, bidders on average bid much more aggressively than predicted by theory. There is also evidence of a scale effect, with more aggressive bidding in the small-scale treatment compared to the large-scale treatment. It is argued that these features are consistent with joy of winning and anticipated regret.

Suggested Citation

  • Elskamp, Rebecca & Kirkegaard, René, 2019. "Scale effects in multi-unit auctions," Games and Economic Behavior, Elsevier, vol. 116(C), pages 116-121.
    • Handle: RePEc:eee:gamebe:v:116:y:2019:i:c:p:116-121
    DOI: 10.1016/j.geb.2019.04.009
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    References listed on IDEAS

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    1. DavidJ. Cooper & Hanming Fang, 2008. "Understanding Overbidding In Second Price Auctions: An Experimental Study," Economic Journal, Royal Economic Society, vol. 118(532), pages 1572-1595, October.
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    More about this item

    Keywords

    Multi-unit demand; Uniform-price auction;

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions

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