Allocating priority with auctions: An Experimental Analysis

Abstract

There are many examples of markets where resources that were allocated ex ante must be rationed ex post. Two alternative methods of rationing are considered in this paper: Priority Service [see Chao and Wilson (American Economic Review 77, 1987) and Wilson (Econometrica 57, 1989)] and Proportional Rationing [see Spulber (International Economic Review 33, 1992)]. An experimental environment is developed in which the two rules are implemented within two well known institutions, the English and the Uniform Price Sealed Bid Auctions, under two different information conditions. We find that Priority Service generates more efficient allocations than Proportional Rationing, and the Sealed Bid Auction performs better than the English. Both mechanisms and rationing rules are more efficient when there is a lack of common information.