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Buy or wait, that is the option: the buyer's option in sequential laboratory auctions
Author(s) -
Février Philippe,
Linnemer Laurent,
Visser Michael
Publication year - 2007
Publication title -
the rand journal of economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 3.687
H-Index - 108
eISSN - 1756-2171
pISSN - 0741-6261
DOI - 10.1111/j.1756-2171.2007.tb00046.x
Subject(s) - common value auction , bidding , microeconomics , revenue , unit (ring theory) , ranking (information retrieval) , multiunit auction , economics , vickrey auction , auction theory , computer science , finance , mathematics , mathematics education , machine learning
We report results from an experiment on two‐unit sequential auctions with and without a buyer's option (which allows the winner of the first auction to buy the second unit). The four main auction institutions are studied. Observed bidding behavior is close to Nash equilibrium bidding in the auctions for the second unit, but not in the auctions for the first unit. Despite these deviations, the buyer's option is correctly used in most cases. The revenue ranking of the four auctions is the same as in single‐unit experiments. Successive prices are declining when the buyer's option is available.