This award is funded under the American Recovery and Reinvestment Act of 2009 (Public Law 111-5).
This award funds research to conduct laboratory experiments that will compare the outcomes of different auction mechansims. One of the most fruitful areas of theoretical auction research has been the comparison of static auction mechanisms with dynamic auction mechansims and the development of new dynamic auction desgins for auctioning multiple items. This project provides new empirical evidence comparing the performance of static and dynamic auctions when bidders are financially constrained. This evidence is particularly noteworthy because it sheds new light on how auctions for multiple items with common values perform in practice.
Specifically, the experiments compare sealed bid and dynamic auction formats in common value environments where bidders have liquidity needs (in reverse auctions) or budget constraints (in standard auctions). Recent research in economic theory predicts that the dynamic auctions result in both higher auction efficiency and higher auction revenue. The experiments test this prediction.
Auctions of this type have been suggested as a method for solving several resource allocation problems. For example, auctions might be used to sell troubled financial assets. Auctions have also been suggested as a way to sell emission allowances, which may be one policy method used to limit greenhouse gas production.
