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Survival auctions

Author

Listed:
  • John Kagel
  • Svetlana Pevnitskaya
  • Lixin Ye

Abstract

Ascending price clock auctions with drop-out information typically yield outcomes closer to equilibrium predictions than do comparable sealed-bid auctions. However clock auctions require congregating all bidders for a fixed time interval, which has limited field applicability and introduces inefficiencies of its own due to the cost of congregating bidders. This paper studies whether such inefficiencies can be removed by implementing a survival auction mechanism. Survival auctions are multi-round sealed-bid auctions with an information revelation component, in which bidders are successively eliminated from the auction from one round to the next. Such auctions have been shown to be strategically equivalent to ascending-bid clock auctions with drop-out information (see Fujishima et. al. 1999). We conduct an experimental study of a multi-unit demand Vickrey survival auction in which all but the lowest bidder make it to the next round and compare the outcomes to a single round, static-Vickrey auction and to Ausubel's dynamic version of the Vickrey auction with drop-out information provided. The paper investigates whether subjects behavior supports the theoretical isomorphism between the Ausubel auction and the survival version of the auction, and therefore whether such auctions can be successfully implemented in practice.
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Suggested Citation

  • John Kagel & Svetlana Pevnitskaya & Lixin Ye, 2007. "Survival auctions," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 33(1), pages 103-119, October.
    • Handle: RePEc:spr:joecth:v:33:y:2007:i:1:p:103-119
    DOI: 10.1007/s00199-006-0156-9
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    References listed on IDEAS

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    1. Kagel, John H & Levin, Dan, 1993. "Independent Private Value Auctions: Bidder Behaviour in First-, Second- and Third-Price Auctions with Varying Numbers of Bidders," Economic Journal, Royal Economic Society, vol. 103(419), pages 868-879, July.
    2. Lawrence M. Ausubel, 2004. "An Efficient Ascending-Bid Auction for Multiple Objects," American Economic Review, American Economic Association, vol. 94(5), pages 1452-1475, December.
    3. Kagel, John H & Harstad, Ronald M & Levin, Dan, 1987. "Information Impact and Allocation Rules in Auctions with Affiliated Private Values: A Laboratory Study," Econometrica, Econometric Society, vol. 55(6), pages 1275-1304, November.
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    Cited by:

    1. David Cooper, 2007. "An introduction to the symposium on behavioral game theory," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 33(1), pages 1-10, October.
    2. Kagel, John H. & Levin, Dan, 2009. "Implementing efficient multi-object auction institutions: An experimental study of the performance of boundedly rational agents," Games and Economic Behavior, Elsevier, vol. 66(1), pages 221-237, May.
    3. Hernando-Veciana, Angel & Michelucci, Fabio, 2018. "Inefficient rushes in auctions," Theoretical Economics, Econometric Society, vol. 13(1), January.
    4. Matt Van Essen, 2013. "Making efficient public good decisions using an augmented Ausubel auction," Economic Theory Bulletin, Springer;Society for the Advancement of Economic Theory (SAET), vol. 1(1), pages 57-68, May.
    5. Engelmann, Dirk & Wolfstetter, Elmar G., 2005. "A Proxy Bidding Mechanism that Elicits all Bids in an English Clock Auction Experiment," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 36, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.

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    More about this item

    Keywords

    Survival auction; Vickrey auction; Ausubel auction; Multi-unit demand auction; D44; D78; C92;
    All these keywords.

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior

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