ABSTRACT

This paper reports the results of controlled experiments designed to test the Harris-Raviv generalization of the Vickrey theory of bidding in multiple unit discriminative auctions. The paper also discusses further development of the theory—in a way suggested by the experimental results—to include bidders with distinct risk preferences.

In a well-known paper, Vickrey [20] formulated a Nash equilibrium model of bidding by risk neutral economic agents in single unit auctions. This analysis was subsequently extended in numerous papers. Vickrey [21] generalized his original model to include multiple unit auctions in which each of N risk neutral bidders can bid on one out of a total of Q homogeneous items up for auction, where 1 ≤ Q < N. In both of the Vickrey papers, individual values for the auctioned object(s) were assumed to be drawn from a uniform distribution. Holt [12] and Riley and Samuelson [19] for single unit auctions and Harris and Raviv [11] for multiple unit auctions have extended the Vickrey model to the case in which valuations are from a general distribution function and all agents have identical concave utility functions.

This paper reports the empirical properties of individual bidding behavior and seller revenue for a group of 28 laboratory experiments designed to test the Harris-Raviv generalization of the Vickrey (hereafter, VHR) model of Nash equilibrium behavior in multiple unit discriminative auctions.