Bid Pooling in Reverse Multi-Unit Dutch Auctions - An Experimental Investigation

Philip Gillen, Alexander Rasch, Achim Wambach, Peter Werner

Research output: Contribution to journalArticleAcademicpeer-review

Abstract

In this article we experimentally investigate reverse multi-unit Dutch auctions in which bidders compete to sell their single unit to a buyer who wants to purchase several objects. Our study yields three insights: (i) bids are substantially higher than Nash equilibrium bids predicted by standard economic theory; (ii) these higher-than-predicted prices gradually decline in later periods; and (iii) bid pooling (or simultaneous bidding) is frequently observed-the majority of bidders submit their bids immediately after the first bidder has sold his unit. A model that distinguishes between myopic and sophisticated bidding strategies helps to organize these patterns both on the aggregate and on the individual level.

Original languageEnglish
Pages (from-to)511-534
Number of pages24
JournalTheory and Decision
Volume81
Issue number4
DOIs
Publication statusPublished - Nov 2016

Keywords

  • Bounded rationality
  • Multi-unit auction
  • Procurement
  • Reverse Dutch auction
  • 1ST-PRICE AUCTIONS
  • PRICE-COMPETITION
  • WINNERS CURSE
  • COLLUSION
  • BEHAVIOR
  • MODEL
  • OLIGOPOLY
  • BELIEFS
  • GAMES

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