Scandinavian Working Papers in Economics

Working Papers,
Lund University, Department of Economics

No 2010:17: Sealed Bid Auctions vs. Ascending Bid Auctions: An Experimental Study

Tommy Andersson (), Christer Andersson and Ola Andersson ()
Additional contact information
Tommy Andersson: Department of Economics, Lund University, Postal: Department of Economics, School of Economics and Management, Lund University, Box 7082, S-220 07 Lund, Sweden
Christer Andersson: Department of Economics, Lund University, Postal: Department of Economics, School of Economics and Management, Lund University, Box 7082, S-220 07 Lund, Sweden
Ola Andersson: Department of Economics, Stockholm School of Economics, Postal: Box 6501, S-113 83 Stockholm, Sweden

Abstract: This paper considers the sealed bid and ascending auction, which both identifies the minimum Walrasian equilibrium prices and where truthful preference revelation constitutes an equilibrium. Even though these auction formats share many theoretical properties, there are behavioral aspects that are not easily captured. To explore this issue in more detail, this paper experimentally investigates what role the design of the auction format has for its outcome. The results suggest that the sealed bid mechanism performs weakly better in all of investigated measures (consistent reporting, efficiency etc.). In addition, we find that the performance of the ascending auction is increasing over time, whereas the sealed bid auction shows no such tendency.

Keywords: Auctions; Non-manipulability; Efficiency; Experiments

JEL-codes: C91; D44

10 pages, December 17, 2010

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