Behavior in Multi-Unit Demand Auctions: Experiments with Uniform Price and Dynamic Vickrey Auctions

Abstract

We experimentally investigate the sensitivity of bidders demanding multiple units of a homogeneous commodity to the demand reduction incentives inherent in uniform price auctions. There is substantial demand reduction in both sealed bid and ascending price clock auctions with feedback regarding rivals’ drop-out prices. Although both auctions have the same normal form representation, bidding is much closer to equilibrium in the ascending price auctions. We explore the behavioral process underlying these differences along with dynamic Vickrey auctions designed to eliminate the inefficiencies resulting from demand reduction in the uniform price auctions. Key words: multi-unit demand auctions, uniform price auction, dynamic Vickrey auction, demand reduction, experiment.