DEMAND REDUCTION IN MULTI-UNIT AUCTIONS WITH VARYING NUMBERS OF BIDDERS: THEORY AND EVIDENCE FROM A FIELD EXPERIMENT

• Published in: International economic review (Philadelphia) Vol. 47; no. 1; pp. 203 - 231
• Main Authors: Engelbrecht-Wiggans, Richard, List, John A., Reiley, David H.
• Format: Journal Article
• Language: English
• Published: 350 Main Street , Malden , MA 02148 , USA , and 9600 Garsington Road , Oxford OX4 2DQ , UK Blackwell Publishing, Inc 01.02.2006; Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association; Blackwell Publishing Ltd
• Subjects: Auctions; Behavior; Bidders; Bidding; Bids; Demand; Demand analysis; Dominant strategy; Economic models; Economic theory; Field experiments; Games of strategy; Market theory; Microeconomics; Nash equilibrium; Proportions; Statistical analysis; Statistical significance; Zero; United States > US
• ISSN: 0020-6598; 1468-2354
• DOI: 10.1111/j.1468-2354.2006.00377.x

Recent auction theory and experimental results document strategic demand reduction by bidders in uniform-price auctions. The present article extends this area of research to consider the effects of varying the number of bidders. Our theoretical model predicts that demand reduction should decrease with an increase in the number of bidders. Considerable demand reduction remains even in the asymptotic limit, although truthful bidding yields profits very close to those of equilibrium play. We experimentally confirm several of our predictions by examining bidding behavior of subjects in an actual marketplace, auctioning dozens of sportscards using both uniform-price and Vickrey auction formats.