A Strategy-Proof Mechanism Should Be Announced to Be Strategy-Proof: An Experiment for the Vickrey Auction

ISER DP No. 1048

89 Pages Posted: 24 Feb 2019 Last revised: 20 Nov 2019

See all articles by Takehito Masuda

Takehito Masuda

Shinshu University

Toyotaka Sakai

Keio University

Shigehiro Serizawa

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

Takuma Wakayama

Ryukoku University

Date Written: November 13, 2019

Abstract

We conduct laboratory experiments for the multi-unit Vickrey auction with and without providing advice to subjects on strategy-proofness. Although the rate of truth-telling among the subjects stays at 20% without advice, the rate increases to 47% with advice. By conducting similar experiments for the pay-your-bid auction, which is not strategy-proof, we confirm that our results are not due to so-called experimenter demand effects. Moreover, advice improves efficiency in the Vickrey auction, particularly in early periods in which subjects are less experienced. It is well known that subjects tend to overbid in several Vickrey auction experiments. Our results indicate the possibility that simple advice decreases such overbidding by promoting better understanding of the strategy-proofness property in the Vickrey auction. Strategy-proof mechanisms are sometimes criticized because players often fail to find the benefit of truth-telling, but our observations show that introducing advice on the property of strategy-proofness helps them to behave “correctly.”

Keywords: advice effect; strategy-proofness; Vickrey auction; pay-your-bid auction; market design

JEL Classification: D44; D71; D61; D82

Suggested Citation

Masuda, Takehito and Sakai, Toyotaka and Serizawa, Shigehiro and Wakayama, Takuma, A Strategy-Proof Mechanism Should Be Announced to Be Strategy-Proof: An Experiment for the Vickrey Auction (November 13, 2019). ISER DP No. 1048, Available at SSRN: https://ssrn.com/abstract=3324776 or http://dx.doi.org/10.2139/ssrn.3324776

Takehito Masuda

Shinshu University ( email )

Nagano, 390-8621
Japan

Toyotaka Sakai

Keio University ( email )

2-15-45 Mita
Minato-ku
Tokyo, 108-8345
Japan

Shigehiro Serizawa (Contact Author)

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)

Takuma Wakayama

Ryukoku University ( email )

67 Tsukamoto-cho,Fukakusa,
Fushimi-ku,
Kyoto, Kyoto 612-8577
Japan

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