The Chopstick Auction: A Study of the Exposure Problem in Multi-Unit Auctions

35 Pages Posted: 23 Aug 2006

See all articles by Florian Englmaier

Florian Englmaier

Department of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Pablo Guillen

Harvard Business School; Autonomous University of Barcelona - Faculty of Economics and Business Studies

Loreto Llorente

University of Navarra - School of Economics

Sander Onderstal

University of Amsterdam; Tinbergen Institute

Rupert Sausgruber

Vienna University of Economics and Business - Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: August 2006

Abstract

Multi-unit auctions are sometimes plagued by the so-called exposure problem. In this paper, we analyze a simple game called the 'chopstick auction' in which bidders are confronted with the exposure problem. We do so both in theory and in a laboratory experiment. In theory, the chopstick auction has an efficient equilibrium and is revenue equivalent with the second-price sealed-bid auction in which the exposure problem is not present. In the experiment, however, we find that the 'chopstick' auction is less efficient than the second-price sealed-bid auction and that it yields more [the same] revenue if bidders are inexperienced [experienced].

Keywords: chopstick auction, exposure problem, laboratory experiment, second-price sealed-bid auction

JEL Classification: C9, D44

Suggested Citation

Englmaier, Florian and Guillen, Pablo and Llorente, Loreto and Onderstal, Sander and Sausgruber, Rupert, The Chopstick Auction: A Study of the Exposure Problem in Multi-Unit Auctions (August 2006). CESifo Working Paper Series No. 1782. Available at SSRN: https://ssrn.com/abstract=926044

Florian Englmaier (Contact Author)

Department of Economics ( email )

Ludwigstrasse 28
Munich, D-80539
Germany

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Pablo Guillen

Harvard Business School ( email )

Soldiers Field Road
Morgan 270C
Boston, MA 02163
United States
617-495-6753 (Phone)

Autonomous University of Barcelona - Faculty of Economics and Business Studies ( email )

Campus Bellaterra
Barcelona, 08193
Spain

Loreto Llorente

University of Navarra - School of Economics ( email )

Universidad de Navarra
Campus Universitario
Pamplona, 31009
Spain

Sander Onderstal

University of Amsterdam ( email )

Roetersstraat 11
Amsterdam, 1018 WB
Netherlands

Tinbergen Institute ( email )

Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands

Rupert Sausgruber

Vienna University of Economics and Business - Department of Economics ( email )

Welthandelsplatz 1
Vienna, 1020
Austria
+43 1 31336 4572 (Phone)

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