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Ascending Prices and Package Bidding: A Theoretical and Experimental Analysis

Kagel, John H. and Lien, Yuanchuan and Milgrom, Paul (2010) Ascending Prices and Package Bidding: A Theoretical and Experimental Analysis. American Economic Journal: Microeconomics, 2 (3). pp. 160-185. ISSN 1945-7669.

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We use theory and experiment to explore the performance of multi-round, price-guided, combinatorial auctions. We define efficiency-relevant and core-relevant packages and show that if bidders bid aggressively on these and losing bidders bid to their limits, then the auction leads to efficient or core allocations. We study the theoretically relevant behaviors and hypothesize that subjects will make only a few significant bids, and that certain simulations with auto-bidders will predict variations in performance across different environments. Testing the combinatorial clock auction (CCA) design, we find experimental support for these two hypotheses. We also compare the CCA to a simultaneous ascending auction.

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Additional Information:© 2010 American Economic Association. We are grateful to the referees for their comments and suggestions. We thank Nels Christiansen and Marissa Beck who provided valuable research support; David Moshal who created the auction software; and Jo Ducey for editorial assistance. We thank Peter Cramton, Jacob Goeree, Marion Ott, and attendees at the University of Arizona conference in honor of Vernon Smith’s eightieth birthday, and attendees at the Pennsylvania State University CAPCP conference for helpful comments. Kagel and Milgrom acknowledge financial help from the National Science Foundation (grant ITR-0427770), and Kagel acknowledges help from the National Science Foundation (grant SES-0648293). The experimental instructions, together with the other electronic appendices, are available on the American Economic Journal: Microeconomics Web site.
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Issue or Number:3
Classification Code:JEL D44
Record Number:CaltechAUTHORS:20170408-171406252
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Official Citation:Kagel, John H., Yuanchuan Lien, and Paul Milgrom. 2010. "Ascending Prices and Package Bidding: A Theoretical and Experimental Analysis." American Economic Journal: Microeconomics, 2(3): 160-85. DOI: 10.1257/mic.2.3.160
Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:76309
Deposited By: 1Science Import
Deposited On:12 Mar 2018 23:48
Last Modified:03 Oct 2019 16:59

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