Scandinavian Working Papers in Economics

Working papers in Transport Economics,
CTS - Centre for Transport Studies Stockholm (KTH and VTI)

No 2012:24: Multi-unit common value auctions: an experimental comparison between the static and the dynamic uniform auction

Joakim Ahlberg ()
Additional contact information
Joakim Ahlberg: VTI, Postal: Centrum för Transportstudier (CTS), Teknikringen 10, 100 44 Stockholm, Sweden

Abstract: It is still an open question whether the dynamic or the static format should be used in multi-unit settings, in a uniform price auction. The present study conducts an economic experiment in a common value environment, where it is found that it is more a question of whether the auctioneer wants to facilitate price discovery, and thereby lessen the otherwise pervasive overbidding, or if only the revenue is important. The experiment in the present paper provides evidence that the static format gives significantly greater revenue than the dynamic auction, in both small and large group sizes. But a higher revenue comes at a cost; half of the auctions in the static format yield negative profits to the bidders, the winner's curse is more severely widespread in the static auction, and only a minority of the bidders use the equilibrium bidding strategy.

Keywords: Laboratory experiment; Multi-Unit auction; Common value auction

JEL-codes: C72; C91; D44

37 pages, November 5, 2012

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