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An experimental study of VCG mechanism for multi-unit auctions: competing with machine bidders

Author

Listed:
  • Satoshi Takahashi

    (The University of Electro-Communications)

  • Yoichi Izunaga

    (Kanagawa University)

  • Naoki Watanabe

    (Keio University)

Abstract

This paper complements the main experimental result reported in Takahashi et al. (Evolut Inst Econ Rev 16:357–374, 2019) to a deeper understanding of subjects’ bidding behavior under the VCG mechanism. In the experiment, there are two types of appearance of information about bidders’ valuations of the item given to them and the bids they are asked to submit: one is unit valuations and the unit bids themselves (Appearance 1) and the other is unit valuations and the unit bids multiplied by the number of units (Appearance 2). For subjects who compete with truth-telling machine bidders in multi-unit auctions, we confirmed that in Appearance 1, they choose truth-telling bids more frequently, and efficient allocations are observed more frequently, as compared to the situation where they compete with human bidders. This result suggests a possibility that in Appearance 1, subjects learn their dominant strategy not by practicing with other subjects but by practicing with machine bidders in experiments for multi-unit auctions, although the item allocation and payment determination under the VCG mechanism is never intuitively understandable to the subjects.

Suggested Citation

  • Satoshi Takahashi & Yoichi Izunaga & Naoki Watanabe, 2022. "An experimental study of VCG mechanism for multi-unit auctions: competing with machine bidders," Evolutionary and Institutional Economics Review, Springer, vol. 19(1), pages 97-117, April.
    • Handle: RePEc:spr:eaiere:v:19:y:2022:i:1:d:10.1007_s40844-021-00198-1
    DOI: 10.1007/s40844-021-00198-1
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    References listed on IDEAS

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    1. Kagel, John H & Levin, Dan, 2001. "Behavior in Multi-unit Demand Auctions: Experiments with Uniform Price and Dynamic Vickrey Auctions," Econometrica, Econometric Society, vol. 69(2), pages 413-454, March.
    2. Satoshi Takahashi & Yoichi Izunaga & Naoki Watanabe, 2019. "VCG mechanism for multi-unit auctions and appearance of information: a subject experiment," Evolutionary and Institutional Economics Review, Springer, vol. 16(2), pages 357-374, December.
    3. Dirk Engelmann & Veronika Grimm, 2009. "Bidding Behaviour in Multi‐Unit Auctions – An Experimental Investigation," Economic Journal, Royal Economic Society, vol. 119(537), pages 855-882, April.
    4. Satoshi Takahashi & Yoichi Izunaga & Naoki Watanabe, 2018. "An approximation algorithm for multi-unit auctions: numerical and subject experiments," Operations Research and Decisions, Wroclaw University of Science and Technology, Faculty of Management, vol. 28(1), pages 95-115.
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    More about this item

    Keywords

    Multi-unit auction; VCG mechanism; Experiment; Human and machine bidders; Truth-telling bids;
    All these keywords.

    JEL classification:

    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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