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Endogenous reference price auctions for a diverse set of commodities: an experimental analysis

Published online by Cambridge University Press:  14 March 2025

Olivier Armantier  and
Charles A. Holt
Olivier Armantier*
Affiliation:
Federal Reserve Bank of New York, New York, NY, USA
Charles A. Holt
Affiliation:
The University of Virginia, Charlottesville, Virginia, USA
*
[email protected]
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Abstract

This paper is concerned with multi-object, multi-unit auctions with a budget constrained auctioneer who has noisy value estimates for each object. We propose a new allocation mechanism, the endogenous reference price auction, with two key features. First, bids are normalized across objects using “reference prices.” Second, reference prices are set endogenously using information extracted from the bids submitted. We report on an experiment showing that a simple endogenous process mitigates value inaccuracies and improves three performance measures: the seller’s profit, allocative efficiency and total surplus. These results have important implications for large auctions used in practice.

Keywords

Auction designLaboratory experimentAllocation mechanism

JEL classification

D44: Auctions G10: General E58: Central Banks and Their Policies C92: Laboratory, Group Behavior
Type
Original Paper
Information
Experimental Economics , Volume 27 , Issue 1: Special Issue in Honor of John H. Kagel , March 2024 , pp. 9 - 35
Copyright
Copyright © The Author(s), under exclusive licence to Economic Science Association 2023

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