Keeping Out Trojan Horses: Auctions and Bankruptcy in the Laboratory
Tinbergen Institute Discussion Paper 11-024/1
28 Pages Posted: 13 Feb 2011
Date Written: February 8, 2011
If a government auctions the right to market a good, continuity is likely to be of significant importance. In a laboratory experiment, we compare the effects of bidders' limited liability in the first-price sealed-bid auction and the English auction in a common value setting. Our data strongly reject our theoretical prediction that the English auction leads to less aggressive bids and fewer bankruptcies than the first-price sealed-bid auction. X-cursedness gives a robust explanation of our experimental observations, in contrast to risk aversion and asymmetric equilibria.
Keywords: Auctions, Bankruptcy, Laboratory Experiment
JEL Classification: C91, D44, L41
Suggested Citation: Suggested Citation