We study bidder collusion and test the power of payoff dominance as an equilibrium selection principle in experimental multi-object ascending auctions. In these institutions low-price collusive equilibria exist along with competitive payoff-inferior equilibria. Achieving payoff-superior collusive outcomes requires complex strategies that, depending on the environment, may involve signalling, market splitting, and bid rotation. We provide the first systematic evidence of successful bidder collusion in such complex environments without communication. The results demonstrate that in repeated settings bidders are often able to coordinate on payoff-superior outcomes, with the choice of collusive strategies varying systematically with the environment. Copyright 2007 The Author(s). Journal compilation Royal Economic Society 2007.
The paper reports the results of an experimental study of the three firm location problem. We compare the subjects' behavior in the experiments with the symmetric mixed strategy Nash equilibrium calculated by Shaked (1982).Overall, the findings are consistent with the equilibrium prediction. However, the subjects' locations were significantly more dispersed than predicted by the theory. Three alternative explanations of this phenomenon -inexperience, approximate equilibrium behavior and risk aversion -are suggested and evaluated for their predictive power. Special attention is paid to risk aversion.
Dynamic externalities are at the core of many long-term environmental problems, from species preservation to climate change mitigation. We use laboratory experiments to compare welfare outcomes and underlying behavior in games with dynamic externalities under two distinct settings: traditionally studied games with infinitely-lived decision makers, and more realistic intergenerational games. We show that if decision makers change across generations, resolving dynamic externalities becomes more challenging for two distinct reasons. First, decision makers' actions may be shortsighted due to their limited incentives to care about the future generations' welfare. Second, even when the incentives are perfectly aligned across generations, increased strategic uncertainty of the intergenerational setting may lead to an increased inconsistency of * This research was supported by the University of Hawaii College of Social Sciences research grant and the Grant-in-Aid for Scientific Research on Priority Areas from the Ministry of Education, Science and Culture of Japan. We would like to thank the Editor, two anonymous referees, Timothy Halliday, Emmanuel Vespa, Alistair Wilson, and participants of the Economic Science Association meetings for many useful comments and suggestions.
Abstract. We survey experimental research on multiunit auctions with an emphasis on topics that may be of a unifying interest to experimental, as well as theoretical and empirical economists. Topics include static and dynamic multiunit auctions; combinatorial auctions and efficient auction design; simultaneous and sequential auctions; bidder asymmetry and endogenous entry, and collusion in auctions. We also discuss behavioral regularities observed in multiunit auction experiments.
We consider payment schemes in experiments that model infinite-horizon games by using random termination. We compare paying subjects cumulatively for all periods of the game; with paying subjects for the last period only; with paying for one of the periods, chosen randomly. Theoretically, assuming expected utility maximization and risk neutrality, both the Cumulative and the Last period payment schemes induce preferences that are equivalent to maximizing the discounted sum of utilities. The Lastperiod payment is also robust under different attitudes towards risk. In comparison, paying subjects for one of the periods chosen randomly creates a present period bias.We further provide experimental evidence from infinitely repeated Prisoners' Dilemma games that supports the above theoretical predictions.
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