Repeated Rounds with Price Feedback in Experimental Auction Valuation: An Adversarial Collaboration
19 Pages Posted: 8 Apr 2020
Date Written: January 2012
It is generally thought that market outcomes are improved with the provision of market information. As a result, the use of repeated rounds with price feedback has become standard practice in the applied experimental auction valuation literature. We conducted two experiments to determine how rationally subjects behave with and without price feedback in a second‐price auction. Results from an auction for lotteries show that subjects exposed to price feedback are significantly more likely to commit preference reversals. However, this irrationality diminishes in later rounds. Results from an induced value auction indicate that price feedback caused greater deviations from the Nash equilibrium bidding strategy. Our results suggest that while bidding on the same item repeatedly improves auction outcomes (i.e., reduced preference reversals or bids closer to induced values), this improvement is not the result of price feedback.
Keywords: bid affiliation, posted prices, induced value experiment, preference reversals, lotteries
JEL Classification: D44
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