Auctions in near-continuous time

Abstract

The lack of a behavioral isomorphism between theoretically equivalent auction institutions is a robust finding in experimental economics. Using a near-continuous time environment and graphically adjustable bid functions, we are able to provide subjects with extensive feedback in multiple auction formats. We find that (1) First Price and Dutch Clock auctions are behaviorally isomorphic and (2) Second Price and English Clock auctions are behaviorally isomorphic. We further replicate the established result (1) that prices in Dutch Clock auctions exceed those of English Clock auctions and (2) that prices in First Price auctions exceed those of Second Price auctions. The latter pattern is often attributed to risk aversion which changes the equilibrium bidding strategy for First Price and Dutch Clock auctions. Because we observe each participant’s bid function directly, we find evidence suggesting a different explanation, namely that bidders are best responding to the distribution of observed prices.