Strategic price discounting and rationing in uniform price auctions

I modify the uniform-price auction rules in allowing the seller to ration bidders. This allows me to provide a strategic foundation for underpricing when the seller has an interest in ownership dispersion. Moreover, many of the so-called “collusive-seeming” equilibria disappear.     

Uniform price auctions and fixed price offerings in IPOs: an experimental comparison

We compare uniform price auctions with fixed price offerings in Initial Public Offerings (IPO) using laboratory experiments. The experimental environment is based on the Biais and Faugeron-Grouzet (J. Financ. Intermed. 11:9–36, 2002) model. Standard predictions based on tacit collusion equilibria (TCE) suggest lower revenues in uniform price auctions, although alternative equilibria allow for higher revenues. In our experiment, there is no evidence that TCE are played. The experiment suggests that the uniform price auctions are superior to fixed price offerings in terms of raising revenues.

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Electronic Supplementary Material  The online version of this article () contains supplementary material, which is available to authorized users.      

Inter-ethnic trust and reciprocity: results of an experiment with small businessmen

We investigate inter-ethnic trust and reciprocity by having subjects from distinct ethnic origins play the trust game [Games Econom. Behav. 10 (1995) 122]. The participants in the experiment are male small businessmen of Turkish or Belgian ethnic origin, all of whom have a business in the same city (Ghent, Belgium). Our main finding is that the average levels of trust and reciprocity are independent of ethnic origin and, moreover, independent of the ethnic origin of the opposite party.     

Are low-price promises collusion guarantees? An experimental test of price matching policies

In a symmetric differentiated experimental duopoly we test the ability of Price Matching Guarantees (PMG) to raise prices above the competitive levels. PMG are introduced both as a market rule (the selling price is always the lowest posted price) and as a business strategy (subjects decide whether or not to offer them). Our results show that PMG lead to a clear collusive outcome as markets quickly and fully converge to the collusive prediction if PMG are imposed as a market rule. Whenever subjects are allowed to decide whether to adopt PMG or not we observe that almost all subjects decide to adopt them and prices get very close to the collusive ones.      

A controlled field experiment on corruption

This paper reports on a controlled field experiment on corruption designed to address two important issues: the experimenter's scrutiny and the unobservability of corruption. In the experiment, a grader is offered a bribe along with a demand for a better grade. We find that graders respond more favorably to bigger bribes, while the effect of higher wages is ambiguous: it lowers the bribe's acceptance, but it fosters reciprocation. Monitoring and punishment can deter corruption, but we cannot reject that it may also crowd-out intrinsic motivations for honesty when intensified. Finally, our results suggest several micro-determinants of corruption including age, ability, religiosity, but not gender.     

Auctions in which losers set the price

We study auctions of a single asset among symmetric bidders with affiliated values. We show that the second-price auction minimizes revenue among all efficient auction mechanisms in which only the winner pays, and the price only depends on the losers' bids. In particular, we show that the kth price auction generates higher revenue than the second-price auction, for all k>2. If rationing is allowed, with shares of the asset rationed among the t highest bidders, then the (t+1)st price auction yields the lowest revenue among all auctions with rationing in which only the winners pay and the unit price only depends on the losers' bids. Finally, we compute bidding functions and revenue of the kth price auction, with and without rationing, for an illustrative example much used in the experimental literature to study first-price, second-price and English auctions.     

Fixed prices versus predetermined prices and the equilibrium probability of price adjustment

Elsewhere, papers comparing fixed prices with predetermined prices have assumed that the frequency of re-setting price contracts is equal in either case. This note demonstrates that in equilibrium, the frequency of re-setting price contracts is greater with fixed prices than predetermined prices.     

An experimental investigation of soft price caps in uniform price auction markets for wholesale electricity

This paper presents the results from an auction experiment using industry professionals and student participants who compete in a simulated wholesale market for electricity. Motivated by the intervention by FERC in response to the “meltdown” of the California spot market, we investigate the effect of including a “soft” price cap in a uniform price auction as a means of mitigating high prices. When prices are driven above the soft cap, offer curves become flat, in contrast to the hockey stick shape observed in a typical uniform price auction for electricity. This flat offer curve leads to market prices that are relatively insensitive to both generation costs and demand reductions.      

Second price auctions on general preference domains: two characterizations

Auction theory usually assumes the quasi-linearity of individual preferences. We drop this assumption and define an extension of second price mechanisms that applies to general preferences. It turns out that the extended second price mechanisms are the only rules satisfying efficiency, strategy-proofness, and a mild non-imposition property. Their definition is simple just as much as the definition of usual second price mechanisms: everyone reports his maximum willingness to pay and the bidder whose reported value is highest buys the auctioned object for the price equal to the second highest reported value. The characterization is valid if efficiency is replaced by envy-freeness. I gratefully acknowledge an associate editor and two anonymous referees for their very helpful comments. Hiroki Saitoh and Shigehiro Serizawa independently obtain a result that is closely related to my main result (see, Remark in Sect. 1). I thank them for sending me the paper and communication, and Yuji Fujinaka for informing me about their work. I also thank the financial support by KAKENHI (19310031).     

理顺价格机制彻底解决电荒

近年来,随着我国经济高速发展,能源需求日益增加,“电荒”现象愈演愈烈。主要原因是由于价格机制不顺,包括电网与电源企业利益分配失衡,火电与新能源价格、电煤与煤电价格、高油价与电价、电价与CPI等机制的不协调。只有理顺价格机制,才能彻底解决电荒危机。     

Asset price bubbles and crashes with near-zero-intelligence traders

Summary. We examine whether a simple agent-based model can generate asset price bubbles and crashes of the type observed in a series of laboratory asset market experiments beginning with the work of Smith, Suchanek and Williams (1988). We follow the methodology of Gode and Sunder (1993, 1997) and examine the outcomes that obtain when populations of zero-intelligence (ZI) budget constrained, artificial agents are placed in the various laboratory market environments that have given rise to price bubbles. We have to put more structure on the behavior of the ZI-agents in order to address features of the laboratory asset bubble environment. We show that our model of near-zero-intelligence traders, operating in the same double auction environments used in several different laboratory studies, generates asset price bubbles and crashes comparable to those observed in laboratory experiments and can also match other, more subtle features of the experimental data.Received: 15 July 2003, Revised: 28 September 2004, JEL Classification Numbers: D83, D84, G12. Correspondence to: John DuffyWe would like to thank an Anonymous referee, Guillaume Frechette, David Laibson, Al Roth and participants in Harvard Experimental and Behavioral Economics Workshop for their comments, and Charles Noussair for providing his data set.     

The impact of price floors on farmland investments: a real options based experimental analysis

Price floors are a common instrument for market intervention to stimulate investments. In some cases, it can be observed that a price floor does not have the stimulating effect. We experimentally analyse the investment behaviour of students who take the role of farmers. The experiment considers an investment problem under uncertainty in a ‘with price floor’ and a ‘no price floor’ treatment, stylizing a decision to take an ongoing farmland investment option. We compare the actual investment behaviour with normative benchmarks of the net present value and the real options approach. Furthermore, we look at order and learning effects. The results show that the price floor has no significant impact on the willingness to invest, whereas the effects of order were statistically significant. The investment reluctance arising from an abolishment is stronger than the investment stimulation arising from the introduction of a price floor. Furthermore, neither the net present value nor the real options approach is appropriate to predict the investment behaviour in general. Nevertheless, the predictions of the real options approach enable an approximation of the participants’ investment behaviour if the individuals have an adequate chance to learn from personal experience.     

Deterring collusion with a reserve price: an auction experiment

Experimental Economics - We experimentally compare collusive behaviors in first-price sealed-bid auctions without and with a reserve price. Before the auction begins, a bidder may offer a bribe to...     

Estimation of house price differential of urban tree cover: an application of sample selection approach

Hedonic valuation of urban forest amenities tends to assume that these attributes are exogenous to sample selection, which might render the estimated results misleading. This article intends to estimate the house price differential of urban tree cover by considering the sample selection issue. The main hypothesis is that houses with high tree cover generates higher utility to consumers, and thus leads to higher house price, ceteris paribus. It may attribute to the fact that consumers self-select into purchasing houses with high- or low-density tree cover based on some unobserved systematically different characteristics. As a result, estimates from sample selection models confirm the hypothesis that purchasing a house with high-density tree cover leads to a positive price differential compared with the low-density tree cover in Napa, Los Angeles, and that buying a low-density tree cover house results in negative price differential in Napa, Los Angeles.     

Indirect reciprocity and strategic reputation building in an experimental helping game

We study indirect reciprocity and strategic reputation building in an experimental helping game. At any time only half of the subjects can build a reputation. This allows us to study both pure indirect reciprocity that is not contaminated by strategic reputation building and the impact of incentives for strategic reputation building on the helping rate. We find that pure indirect reciprocity exists, but also that the helping decisions are substantially affected by strategic considerations. Finally, we find that strategic do better than non-strategic players and non-reciprocal do better than reciprocal players, casting doubt on previously proposed evolutionary explanations for indirect reciprocity.     

中国商业银行信贷业务经营中的贷款定价问题研究

近年来中国商业银行信贷业务快速扩张势头尤为强劲,但与其相适应的信贷业务经营收益水平却未随之同步提高,由此凸现出信贷业务快速扩张背后贷款定价问题的困扰。提高中国商业银行的贷款定价能力,从而在信贷业务经营过程中,卡准信贷资金成本与收益的啮合点,做到信贷业务经营成本的可控性,提高信贷业务经营收益水平是解决困扰之选择。     

House money effects in public good experiments: Comment

We reconsider evidence from experiments that claim to show that using “house money” in standard public goods experiments has no effect on behavior. We show that it does have an effect when one examines the data using appropriate statistical methods that consider individual-level responses and account for the error structure of the panel data. JEL Classification D7 · C92 I am grateful for comments from two referees and an editor. All data and statistical code are available for public access at the ExLab Digital Library located at http://exlab.bus.ucf.edu.     

Relationships between oil price shocks and stock market: an empirical analysis from Greater China

Although a lot of empirical research has studied the relationship between changes in oil price and economic activity, it is surprising that little research has been conducted on the relationship between oil price shocks and the Greater China region (China, Hong Kong and Taiwan). Therefore, the main goal of this article is to apply detailed monthly data from 1997/7 to 2008/9 to fill this gap. Compared to the effect of US stock market returns described by Kilian (2009 Kilian, L. 2009. Not All oil price shocks are alike: Disentangling demand and supply shocks in the crude oil market. American Economic Review, 99: 1053–69. [Crossref], [Web of Science ®] , [Google Scholar]) and Kilian and Park (2009 Kilian, L. and Park, C. 2009. The impact of oil price shocks on the US stock market. International Economic Review, 50: 1267–87. [Crossref], [Web of Science ®] , [Google Scholar]), we found that the impact of oil price shocks on stock prices in Greater China has been mixed. First, the impact of oil price shocks on Taiwan's stock market is very similar to that on the US stock market. Additionally, all three shocks have had significantly positive impacts on Hong Kong's stocks, partially in contrast to the effects on the US stock market. However, in contrast to the effect in the US stock market, we found that only global oil supply shock has a significantly positive impact on China's stock returns, but global oil demand shock and the oil specific demand shock have no significant impacts. The reason for the lack of significant impacts is that the positive expectation effect of China's fast economic growth may be just offset by the negative effect of a precautionary demand-driven effect. This result is also consistent with the previous empirical findings that the segmented and integrated China stock market is mixed, and it implies that the China stock market is ‘partially integrated’ with the other stock markets and oil price shocks.     

Toward an experimental foundation for benefit-cost analysis

Empirical results from experimental economics and neuroscience have uncovered regularities in human behavior that may provide a base for new approaches to welfare theory and economic policy. These empirical findings do not challenge basic economic concepts but they do imply that our assumptions about “rational behavior”, “opportunity cost”, and “social welfare” should be revised using sound scientific evidence and methods. This research has the potential to make benefit-cost analysis more reflective of how people value gains and losses, and more responsive to considerations of environmental and social responsibility.