An Experimental Study on Sequential Auctions with Privately Known Capacities

46 Pages Posted: 18 Dec 2017

See all articles by Luca Corazzini

Luca Corazzini

Ca Foscari University of Venice - Dipartimento di Economia

Stefano Galavotti

University of Florence - Department of Mathematics for Decisions

Paola Valbonesi

University of Padua - Department of Economics and Management, DSEA

Date Written: December 6, 2017

Abstract

We experimentally study bidding behavior in sequential first-price procurement auctions where bidders’ capacity constraints are private information. Treatment differs in the ex-ante probability distribution of sellers’ capacities and in the (exogenous) probability that the second auction is actually implemented. Our results show that: (i) bidding behavior in the second auction conforms with sequential rationality; (ii) while first auction’s bids negatively depend on capacity, bidders seem unable to recognize this link when, at the end of the first auction, they state their beliefs on the opponent’s capacity. To rationalize this inconsistency between bids and beliefs, we conjecture that bidding in the first auction is also affected by a hidden, behavioral type – related to the strategic sophistication of bidders – that obfuscates the link between capacity and bids. Building on this intuition, we show that a simple level-k model may help explain the inconsistency.

Keywords: Sequential auctions, capacity constraints, belief inconsistency

JEL Classification: D44, D91, H57

Suggested Citation

Corazzini, Luca and Galavotti, Stefano and Valbonesi, Paola, An Experimental Study on Sequential Auctions with Privately Known Capacities (December 6, 2017). University Ca' Foscari of Venice, Dept. of Economics Research Paper Series No. 30/WP/2017. Available at SSRN: https://ssrn.com/abstract=3088928 or http://dx.doi.org/10.2139/ssrn.3088928

Luca Corazzini (Contact Author)

Ca Foscari University of Venice - Dipartimento di Economia ( email )

Cannaregio 873
Venice, 30121
Italy

HOME PAGE: http://www.unive.it/pag/16892/

Stefano Galavotti

University of Florence - Department of Mathematics for Decisions ( email )

Via Lombroso 6/17
Florence
Italy

Paola Valbonesi

University of Padua - Department of Economics and Management, DSEA ( email )

via Del Santo 33
Padova, 35123
Italy
+39+049+8274058 (Phone)

HOME PAGE: http://www.decon.unipd.it

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