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Discrete clock auctions: an experimental study

Published online by Cambridge University Press:  14 March 2025

Peter Cramton ,
Emel Filiz-Ozbay ,
Erkut Y. Ozbay  and
Pacharasut Sujarittanonta
Peter Cramton
Affiliation:
Department of Economics, University of Maryland, College Park, MD, USA
Emel Filiz-Ozbay*
Affiliation:
Department of Economics, University of Maryland, College Park, MD, USA
Erkut Y. Ozbay
Affiliation:
Department of Economics, University of Maryland, College Park, MD, USA
Pacharasut Sujarittanonta
Affiliation:
Department of Economics, University of Maryland, College Park, MD, USA
*
[email protected]
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Abstract

We analyze the implications of different pricing rules in discrete clock auctions. The two most common pricing rules are highest-rejected bid (HRB) and lowest-accepted bid (LAB). Under HRB, the winners pay the lowest price that clears the market; under LAB, the winners pay the highest price that clears the market. In theory, both the HRB and LAB auctions maximize revenues and are fully efficient in our setting. Our experimental results indicate that the LAB auction achieves higher revenues. This revenue result may explain the frequent use of LAB pricing. On the other hand, HRB is successful in eliciting true values of the bidders both theoretically and experimentally.

Keywords

Clock auctionsPricing rulesMarket designExperiments

JEL classification

D44: Auctions C78: Bargaining Theory • Matching Theory L96: Telecommunications
Type
Original Paper
Information
Experimental Economics , Volume 15 , Issue 2 , June 2012 , pp. 309 - 322
Copyright
Copyright © 2011 Economic Science Association

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Footnotes

We thank our colleagues, Lawrence M. Ausubel and Daniel R. Vincent, for helpful discussions. We thank the National Science Foundation for support.

Electronic supplementary material The online version of this article (doi:https://doi.org/10.1007/s10683-011-9301-9) contains supplementary material, which is available to authorized users.

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