The Net Effect of Advice on Strategy-Proof Mechanisms: An Experiment for the Vickrey Auction

ISER DP No. 1109RR

46 Pages Posted: 1 Feb 2021 Last revised: 7 Oct 2021

See all articles by Takehito Masuda

Takehito Masuda

Shinshu University

Ryo Mikami

Osaka University - Graduate School of Economics

Toyotaka Sakai

Keio University

Shigehiro Serizawa

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

Takuma Wakayama

Ryukoku University

Date Written: October 5, 2021

Abstract

We conduct laboratory experiments for the multi-unit Vickrey auction with and without advice to subjects on strategy-proofness. The rate of truth-telling among the subjects without advice stays at 20%, whereas the rate increases to 47% among those who have received advice. By conducting similar experiments for the pay-your-bid auction, which is not strategy-proof, we confirm that the increase in truth-telling is due significantly to the net advice effect (i.e., the effect beyond the so-called experimenter demand effect). Moreover, we find that providing advice improves efficiency in the Vickrey auction, particularly in the early periods, when the subjects are less experienced. In general, subjects tend to overbid in Vickrey auction experiments. Our results indicate the possibility that providing simple advice decreases such overbidding by promoting a better understanding of the strategy-proofness of the Vickrey auction. Strategy-proof mechanisms are sometimes criticized because players often fail to recognize the benefit of telling the truth. However, our observations show that introducing advice on the property of strategy-proofness helps them 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 Mikami, Ryo and Sakai, Toyotaka and Serizawa, Shigehiro and Wakayama, Takuma, The Net Effect of Advice on Strategy-Proof Mechanisms: An Experiment for the Vickrey Auction (October 5, 2021). ISER DP No. 1109RR, Available at SSRN: https://ssrn.com/abstract=3748211 or http://dx.doi.org/10.2139/ssrn.3748211

Takehito Masuda

Shinshu University ( email )

Nagano, 390-8621
Japan

Ryo Mikami

Osaka University - Graduate School of Economics ( email )

1-7 Machikaneyama
Toyonaka, Osaka, 560-0043
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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