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Experimental Auction Study

This study examines the dynamics of experimental sealed-bid and Japanese auctions, emphasizing their theoretical and practical implications. Participants navigate various price levels, raising hands to indicate active bidding. The Japanese auction's structure encourages bidders to maximize value by only participating until their worth is reached, while sealed-bid options often lead to bidding below true valuation. This research serves as a pedagogical tool to enhance understanding in economics and behavior sciences, and it's designed to improve strategic decision-making in auctions.

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Experimental Auction Study

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  1. Experimental Auction Study

  2. EXPERIMENTAL Sealed-Bid Auction

  3. My Value HK$XXX EXAMPLE My Bid

  4. EXPERIMENTAL Sealed-Bid Auction

  5. Questions?

  6. Ready?

  7. Go

  8. Japanese Auction Price Level = $ 0.00 Please raise your hand if you’re active

  9. Japanese Auction Price Level = $ 10.00 Please raise your hand if you’re active

  10. Japanese Auction Price Level = $ 20.00 Please raise your hand if you’re active

  11. Japanese Auction Price Level = $ 30.00 Please raise your hand if you’re active

  12. Japanese Auction • At every price level you can raise your hard to indicate that you are active. Otherwise, you abandon the possibility of purchasing the item • Auction ends when there is one or no active bidders remaining • If one is left, item is sold at that price • If none is left, item is sold at the previous price to a randomly selected active bidder at that price level

  13. Questions?

  14. Ready?

  15. Go

  16. Japanese Auction Price Level = $ 0.00 Please raise your hand if you’re active

  17. Japanese Auction Price Level = $ 10.00 Please raise your hand if you’re active

  18. Japanese Auction Price Level = $ 20.00 Please raise your hand if you’re active

  19. Japanese Auction Price Level = $ 30.00 Please raise your hand if you’re active

  20. Japanese Auction Price Level = $ 40.00 Please raise your hand if you’re active

  21. Japanese Auction Price Level = $ 50.00 Please raise your hand if you’re active

  22. Japanese Auction Price Level = $ 60.00 Please raise your hand if you’re active

  23. Japanese Auction Price Level = $ 70.00 Please raise your hand if you’re active

  24. Japanese Auction Price Level = $ 80.00 Please raise your hand if you’re active

  25. Japanese Auction Price Level = $ 90.00 Please raise your hand if you’re active

  26. A Little Theory • In the Japanese auction, exiting when price level exceeds your value is the optimal strategy • This auction is theoretically efficient • Item sold to the bidder who values it most • No gain from secondary trading • In the sealed-bid auction, people generally shade, and the buyer may not value the item most.

  27. Summary • Science comprises both a theoretical and an experimental side • Best practice in engineering incorporates wind-tunnel/test-bed – a natural role for laboratory experiments in business strategy and government policy. • Smart market – which is smarter? Japanese or Sealed-bid? • Pedagogical tool to complement existing approaches in the teaching of economics, business related disciplines, aid the social and behavioral sciences

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