Asymmetric auctions with resale: An experimental study

Abstract

We study auctions with resale based on Hafalir and Krishna's (2008) model.As predicted, weak bidders bid more with resale than without, so that average auction prices tend to increase. When the equilibrium calls for weak types to bid higher than their values with resale they do, but not nearly as much as the theory predicts. In other treatments outcomes are much closer to the risk neutral Nash model's predictions. Bid distributions for weak and strong types are more similar with resale than without, in line with the theory.

English auctions with resale: An experimental study

“…Prices in ENG were slightly higher than in INC but the di¤erence is not so big and not signi…cant. It should be noted that prices in both are a bit lower than the predicted ones though 13 . 12 There is evidence that subjects cannot calculate di¢ cult equilibria.…”

“…It should be noted that prices in both are a bit lower than the predicted ones though 13 . 12 There is evidence that subjects cannot calculate di¢ cult equilibria. Setting an optimal reserve price given your beliefs is a fairly complex task even for theorists.…”

“…This di¤erence in the mechanisms used could be a problem, however the data about the rationality in the choice of reserve prices and in the choice of participation presented in Section 4.2 indicates that subject's behavior in the second stage was fairly rational and competitive, even though we cannot show that they were completely following the Nash prediction. 12 The di¤erence in strategies between treatments translates into di¤erent prices in the auction. As we can see in Table 3, average prices in COMP were almost 18% higher than in INC (p-value=0.002, Mann Whitney U-test comparing the 8 independent observations of each treatment) and 15% higher than in ENG (p-value=0.008, U-test using the 4 independent observations in ENG), whereas the average private values were very similar, as happened with the average equilibrium prices too.…”

Efficiency in auctions with (failed) resale

“…A higher q increases v , thus inducing bidder S to reduce demand more often, because losing a unit in the auction is less costly when there is a high probability of a resale market. 11 In other words, bidder S bids less aggressively in the auction when he may have an option to buy in the resale market, and his bid is lower the higher is the probability of having this option.…”

Entry by Successful Speculators in Auctions with Resale

“…A subject's role as a bidder or speculator was randomly assigned at the start of the experiment, and stayed the same for the duration of the experiment. 10 In treatments where speculators had entry choice, they decided whether to enter the auction or earn the outside option of 10. With multiple speculators, entry decisions were simultaneous.…”