Bidding at Sequential First-Price Auctions With(Out) Supply Uncertainty: A Laboratory Analysis

UFAE and IAE Working Paper No. 558.03

34 Pages Posted: 18 Jun 2003

See all articles by Paul Pezanis-Christou

Paul Pezanis-Christou

University of Adelaide | School of Economics and Public Policy

Tibor Neugebauer

University of York - Derwent College

Date Written: February 7, 2003

Abstract

We report on a series of experiments that test the effects of an uncertain supply on the formation of bids and prices in sequential first-price auctions with private-independent values and unit-demands. Supply is assumed uncertain when buyers do not know the exact number of units to be sold (i.e., the length of the sequence). Although we observe a non-monotone behavior when supply is certain and an important overbidding, the data qualitatively support our price trend predictions and the risk neutral Nash equilibrium model of bidding for the last stage of a sequence, whether supply is certain or not. Our study shows that behavior in these markets changes significantly with the presence of an uncertain supply, and that it can be explained by assuming that bidders formulate pessimistic beliefs about the occurrence of another stage.

Keywords: sequential first-price auctions, independent private values, unit-demand, supply uncertainty, bidding behavior, price trends, experimental economics

JEL Classification: D44, C9

Suggested Citation

Pezanis-Christou, Paul and Neugebauer, Tibor, Bidding at Sequential First-Price Auctions With(Out) Supply Uncertainty: A Laboratory Analysis (February 7, 2003). UFAE and IAE Working Paper No. 558.03, Available at SSRN: https://ssrn.com/abstract=386003 or http://dx.doi.org/10.2139/ssrn.386003

Paul Pezanis-Christou (Contact Author)

University of Adelaide | School of Economics and Public Policy ( email )

Adelaide SA, 5005
Australia

Tibor Neugebauer

University of York - Derwent College ( email )

Heslington
York YO10 5DD
United Kingdom

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