Keeping Out Trojan Horses: Auctions and Bankruptcy in the Laboratory

Tinbergen Institute Discussion Paper 11-024/1

28 Pages Posted: 13 Feb 2011

See all articles by Sander Onderstal

Sander Onderstal

University of Amsterdam; Tinbergen Institute

Ailko van der Veen

affiliation not provided to SSRN

Date Written: February 8, 2011

Abstract

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

Onderstal, Sander and van der Veen, Ailko, Keeping Out Trojan Horses: Auctions and Bankruptcy in the Laboratory (February 8, 2011). Tinbergen Institute Discussion Paper 11-024/1, Available at SSRN: https://ssrn.com/abstract=1759221 or http://dx.doi.org/10.2139/ssrn.1759221

Sander Onderstal (Contact Author)

University of Amsterdam ( email )

Roetersstraat 11
Amsterdam, 1018 WB
Netherlands

Tinbergen Institute ( email )

Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands

Ailko Van der Veen

affiliation not provided to SSRN ( email )

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