Bidding behavior in the bisection auction : an experimental investigation

Abstract

We present a laboratory experiment in which we investigate bidding behavior with independent private values in the recently proposed bisection auction, and compare it with two classical auction formats - the Vickrey auction and the English auction. We test whether subjects behave strategically equivalent, following the dominant truth-telling strategy, as predicted by theory. Furthermore, we provide some insights concerning the learning process, the e‐ciency of allocation, and the revenue to the auctioneer. The data show that the bisection auction performs better than the Vickrey auction and only in some terms worse than the English auction.