Auctions with Endogenous Price Ceiling: Theoretical and Experimental Results

ISER Discussion Paper No. 747

31 Pages Posted: 26 Aug 2009

See all articles by Tatsuyoshi Saijo

Tatsuyoshi Saijo

Osaka University - Institute of Social and Economic Research (ISER)

Shigehiro Serizawa

Osaka University - Institute of Social and Economic Research (ISER)

Kenju Akai

Osaka University - Institute of Social and Economic Research

Robert Ferec Veszteg

University of the Basque Country

Date Written: July 8, 2009

Abstract

This paper analyzes an auction mechanism that excludes overoptimistic bidders inspired by the rules of the procurement auctions adopted by several Japanese local governments. Our theoretical and experimental results suggest that the endogenous exclusion rule reduces the probability of suffering a monetary loss induced by winning the auction, and also mitigates the problem of the winner’s curse in the laboratory. However, this protection comes at the price of a lower revenue for the seller.

Keywords: common-value auctions, experiments, winner’s curse

JEL Classification: C91, D44, D82

Suggested Citation

Saijo, Tatsuyoshi and Serizawa, Shigehiro and Akai, Kenju and Veszteg, Robert Ferec, Auctions with Endogenous Price Ceiling: Theoretical and Experimental Results (July 8, 2009). ISER Discussion Paper No. 747, Available at SSRN: https://ssrn.com/abstract=1431744 or http://dx.doi.org/10.2139/ssrn.1431744

Tatsuyoshi Saijo

Osaka University - Institute of Social and Economic Research (ISER) ( email )

6-1 Mihogaoka
Ibaraki, Osaka 567-0047
Japan
81-(0)6 6879-8571 (Phone)
81-(0)6 6878-2766 (Fax)

HOME PAGE: http://www.iser.osaka-u.ac.jp/~saijo/index-e.html

Shigehiro Serizawa

Osaka University - Institute of Social and Economic Research (ISER) ( email )

6-1 Mihogaoka
Ibaraki, Osaka 567-0047
Japan
+81 6 6879 8558 (Phone)
+81 6 6878 2766 (Fax)

Kenju Akai

Osaka University - Institute of Social and Economic Research ( email )

6-1 Mihogaoka
Ibaraki, Osaka 567-0047
Japan
06-6879-8552 (Phone)
06-6879-8584 (Fax)

Robert Ferec Veszteg (Contact Author)

University of the Basque Country ( email )

Barrio Sarriena s/n
Leioa, Bizkaia 48940
Spain

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