IDEAS home Printed from https://ideas.repec.org/p/hhs/osloec/2002_005.html
   My bibliography  Save this paper

A laboratory stress-test of bid, double and offer auctions

Author

Listed:
  • Søberg, Morten

    (Statistics Norway)

Abstract

This paper reports on the empirical properties of the bid auction (buyers propose prices), offer auction (sellers suggest prices) and double auction (both buyers and seller initiate price quotes). These trading institutions are stress-tested using a nonstationary monopolistic market environment in which the buyers' demand schedule and the single seller's supply curve shift unpredictably between trading periods. The principal result is threefold. First, double auction prices tend to be greater than offer auction prices which again tend to be greater than bid auction prices. Second, the listed ranking reflects tendencies only. The laboratory data do not support statistically significant behavioral differences between the three auctions. Third, trading is highly efficient regardless of auction type.

Suggested Citation

  • Søberg, Morten, 2003. "A laboratory stress-test of bid, double and offer auctions," Memorandum 05/2002, Oslo University, Department of Economics.
    • Handle: RePEc:hhs:osloec:2002_005
    as

    Download full text from publisher

    File URL: http://www.sv.uio.no/econ/english/research/unpublished-works/working-papers/pdf-files/2002/Memo-05-2002.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Ledyard, John O. & Szakaly-Moore, Kristin, 1994. "Designing organizations for trading pollution rights," Journal of Economic Behavior & Organization, Elsevier, vol. 25(2), pages 167-196, October.
    2. Jamison, Julian C. & Plott, Charles R., 1997. "Costly offers and the equilibration properties of the multiple unit double auction under conditions of unpredictable shifts of demand and supply," Journal of Economic Behavior & Organization, Elsevier, vol. 32(4), pages 591-612, April.
    3. Smith, Vernon L, 1982. "Microeconomic Systems as an Experimental Science," American Economic Review, American Economic Association, vol. 72(5), pages 923-955, December.
    4. Paul Klemperer, 1999. "Auction Theory: A Guide to the Literature," Journal of Economic Surveys, Wiley Blackwell, vol. 13(3), pages 227-286, July.
    5. Friedman,Daniel & Sunder,Shyam, 1994. "Experimental Methods," Cambridge Books, Cambridge University Press, number 9780521456821, September.
    6. Charles R. Plott & Vernon L. Smith, 1978. "An Experimental Examination of Two Exchange Institutions," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 45(1), pages 133-153.
    7. Davis, Douglas D. & Harrison, Glenn W. & Williams, Arlington W., 1993. "Convergence to nonstationary competitive equilibria : An experimental analysis," Journal of Economic Behavior & Organization, Elsevier, vol. 22(3), pages 305-326, December.
    8. Vernon L. Smith, 1964. "Effect of Market Organization on Competitive Equilibrium," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 78(2), pages 181-201.
    9. Joyce, Patrick, 1983. "Information and behavior in experimental markets," Journal of Economic Behavior & Organization, Elsevier, vol. 4(4), pages 411-424, December.
    10. Klemperer, Paul, 1999. " Auction Theory: A Guide to the Literature," Journal of Economic Surveys, Wiley Blackwell, vol. 13(3), pages 227-86, July.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Morten Søberg, 2002. "A laboratory stress-test of bid, double and offer auctions," Discussion Papers 327, Statistics Norway, Research Department.
    2. Morten Søberg, 2000. "Imperfect competition, sequential auctions, and emissions trading: An experimental evaluation," Discussion Papers 280, Statistics Norway, Research Department.
    3. Søberg, Martin, 2003. "Voting rules and endogenous trading institutions: An experimental study," Memorandum 17/2002, Oslo University, Department of Economics.
    4. Porter, David & Rassenti, Stephen & Shobe, William & Smith, Vernon & Winn, Abel, 2009. "The design, testing and implementation of Virginia's NOx allowance auction," Journal of Economic Behavior & Organization, Elsevier, vol. 69(2), pages 190-200, February.
    5. Katerina Sherstyuk & Krit Phankitnirundorn & Michael J. Roberts, 2021. "Randomized double auctions: gains from trade, trader roles, and price discovery," Experimental Economics, Springer;Economic Science Association, vol. 24(4), pages 1325-1364, December.
    6. Crowley, Steve & Sade, Orly, 2004. "Does the option to cancel an order in a double auction market matter?," Economics Letters, Elsevier, vol. 83(1), pages 89-97, April.
    7. Albert Ballinger & Gerald P. Dwyer & Ann B. Gillette, 2004. "Trading institutions and price discovery: the cash and futures markets for crude oil," FRB Atlanta Working Paper 2004-28, Federal Reserve Bank of Atlanta.
    8. Wheatley, W. Parker & Buhr, Brian L. & Dipietre, Dennis, 2001. "E-Commerce In Agriculture: Development, Strategy, And Market Implications," Staff Papers 13938, University of Minnesota, Department of Applied Economics.
    9. Morten Søberg, 2002. "Voting rules and endogenous trading institutions: An experimental study," Discussion Papers 328, Statistics Norway, Research Department.
    10. Ortmann, Andreas, 2003. "Charles R. Plott's collected papers on the experimental foundations of economic and political science," Journal of Economic Psychology, Elsevier, vol. 24(4), pages 555-575, August.
    11. Sunnevåg, Kjell J., 2001. "Auction design for the allocation of multiple units of a homogenous good: Theoretical background and practical experience," University of California at Santa Barbara, Economics Working Paper Series qt6wh704p7, Department of Economics, UC Santa Barbara.
    12. Rao, Akshay R & Monroe, Kent B, 1996. "Causes and Consequences of Price Premiums," The Journal of Business, University of Chicago Press, vol. 69(4), pages 511-535, October.
    13. Normann, Hans-Theo, 2010. "Experimentelle Ökonomik für die Wettbewerbspolitik," DICE Ordnungspolitische Perspektiven 06, Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    14. Hailu, Atakelty & Schilizzi, Steven, 2003. "Investigating the performance of market-based instruments for resource conservation: the contribution of agent-based modelling," 2003 Conference (47th), February 12-14, 2003, Fremantle, Australia 57883, Australian Agricultural and Resource Economics Society.
    15. Paul Brewer & Maria Huang & Brad Nelson & Charles Plott, 2002. "On the Behavioral Foundations of the Law of Supply and Demand: Human Convergence and Robot Randomness," Experimental Economics, Springer;Economic Science Association, vol. 5(3), pages 179-208, December.
    16. Grigoriev, A. & Hiller, B. & Marban, S. & Vredeveld, T. & van der Zwaan, G.R.J., 2010. "Dynamic pricing problems with elastic demand," Research Memorandum 053, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).
    17. Philippe Février & William Roos & Michael Visser, 2005. "The Buyer's Option in Multi‐Unit Ascending Auctions: The Case of Wine Auctions at Drouot," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 14(4), pages 813-847, December.
    18. Zhang, Ning, 2009. "Market performance and bidders' bidding behavior in the New York Transmission Congestion Contract market," Energy Economics, Elsevier, vol. 31(1), pages 61-68, January.
    19. Nuzzo, Simone & Morone, Andrea, 2017. "Asset markets in the lab: A literature review," Journal of Behavioral and Experimental Finance, Elsevier, vol. 13(C), pages 42-50.
    20. Marco A. Haan & Linda A. Toolsema, 2011. "License Auctions When Winning Bids Are Financed Through Debt," Journal of Industrial Economics, Wiley Blackwell, vol. 59(2), pages 254-281, June.

    More about this item

    Keywords

    Sequential auctions; experimental economics;

    JEL classification:

    • C90 - Mathematical and Quantitative Methods - - Design of Experiments - - - General
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hhs:osloec:2002_005. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Mari Strønstad Øverås (email available below). General contact details of provider: https://edirc.repec.org/data/souiono.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.