Short communication. Bid affiliation in repeated random nth price auction

Abstract

In most experimental auctions, it is a common practice to carry out several bidding rounds for the same product and to post the winning price at the end of each round. This practice can lead to an affiliation of participants’ bids and biased value estimates if bids between subjects are inter-dependent. In this paper, the effect of posted prices on bidders’ willingness to pay for a good using a random nth price auction is examined. The auctioned good was one kilogram of the Protected Designation Origin (PDO) ‘Mongeta del Ganxet Vallés Maresme’ white bean, stored in a cloth bag. In general, results indicate that bid affiliation is not an issue in the random nth price mechanism. However, consumers’ experience of the auctioned product matters. Experienced subjects are positively influenced by high posted prices while inexperienced subjects tend to decrease their bids when the posted price is low. Interestingly, low posted prices do not influence bids of experienced subjects and high posted prices do not influence bids of inexperienced subjects.