Anthony Kwasnica - Academia.edu (original) (raw)

Papers by Anthony Kwasnica

Management Science, 2011

W e investigate how auctioneers set reserve prices in auctions. A well-established theoretical re... more W e investigate how auctioneers set reserve prices in auctions. A well-established theoretical result, assuming risk neutrality of the seller, is that the optimal reserve price should not depend on the number of participating bidders. In a set of controlled laboratory experiments, we find that seller behavior often deviates from the theoretical benchmarks. We extend the existing theory to explore three alternative explanations for our results: risk aversion, anticipated regret, and probability weighting. After fitting our data to each of these models through parameter estimation techniques on both an aggregate and individual level, we find that all three models are consistent with some of the characteristics of our data, but that the regret model provides a slightly more favorable fit overall.

Production and Operations Management, Jan 5, 2009

We investigate the role of timing in ascending auctions under the premise that time is a valuable... more We investigate the role of timing in ascending auctions under the premise that time is a valuable resource. Traditional models of the English auction ignore timing issues by assuming that the auction occurs instantaneously. However, when auctions are slow, as internet auctions used for procurement often are, there are significant opportunity or monitoring costs to bidders, and the choice of the size of the jump bid becomes a strategic decision. We study this choice in the experimental laboratory by systematically varying the opportunity costs associated with fast bidding. We find that when time is more valuable bidders respond by choosing larger jump bids. Surprisingly, the economic performance of the auction is not significantly affected. We develop a simple model of ascending auctions with impatient bidders that provides insights into the effect jump bids have on auction performance.

Experimental Economics, Jul 14, 2007

We study the role of timing in auctions under the premise that time is a valuable resource. When ... more We study the role of timing in auctions under the premise that time is a valuable resource. When one object is for sale, Dutch and first-price sealed bid auctions are strategically equivalent in standard models, and therefore, they should yield the same revenue for the auctioneer. We study Dutch and first-price sealed bid auctions in the laboratory, with a specific emphasis on the speed of the clock in the Dutch auction. At fast clock speeds, revenue in the Dutch auction is significantly lower than it is in the sealed bid auction. When the clock is sufficiently slow, however, revenue in the Dutch auction is higher than the revenue in the sealed bid auction. We develop and test a simple model of auctions with impatient bidders that is consistent with these laboratory findings. Keywords Auctions • Experimental economics JEL Classification D44 • C91 1 Introduction and related literature The popularity of Internet auctions, such as eBay, has made timing issues in auctions particularly salient. Traditionally, auction houses, such as Christie's, required bidders or their representatives to assemble at a specific place and time, and therefore

We analyze two mechanisms commonly used for selling an asset or a contract, in a setting in which... more We analyze two mechanisms commonly used for selling an asset or a contract, in a setting in which bidders must incur an entry cost in order to learn how much the asset is worth to them: an English auction, and a sequential bidding process. A theory developed by Bulow and Klemperer (2009) predicts that sellers should prefer the auction, because it generates higher average revenues, while bidders should prefer the sequential mechanism, because it generates higher average bidder profits. We compare the two mechanisms in a controlled laboratory environment, varying the entry cost, and find that, contrary to the theoretical predictions, average seller revenues tend to be the same or higher under the sequential mechanism, while average bidder profits are approximately the same. We identify three behavioral causes that explain our result: (1) bidders do not enter the auction 100% of the time, and (2) in the sequential mechanism, bidders do not set pre-emptive bids according to the threshold strategy, and (3) the subsequent bidders tend to over-enter in response to pre-emptive bids by the first bidders. We develop a model of noisy bidder entry decisions, related to quantal response equilibrium, and show, using maximum-likelihood parameter estimation techniques, that our model does a good job in organizing the experimental data, both, in terms of point predictions, as well as in terms of qualitiaitve comparisons of the two mechanisms.

This thesis investigates the theory of cooperative behavior in the presence of asymmetric informa... more This thesis investigates the theory of cooperative behavior in the presence of asymmetric information. Traditionally, the core has been a powerful and much used solution concept to describe cooperative outcomes. In settings where agents have some private information, it may be appropriate to include the opportunity for communication in the development of the core. I study the relationship of various core solution concepts with prevalent noncooperative solution concepts for environments with asymmetric information. The core definitions examined vary by the level of communication assumed. In Chapter 2, I investigate the welfare properties of market equilibria. I demonstrate that appropriate communication restrictions can be placed on the core (and efficiency) in order to obtain first and second welfare theorems. In Chapter 3, I discuss the Bayesian implementation of core solutions. If full communication is assumed, Palfrey and Srivastava (1987) have shown that the core is not Bayesian...

SSRN Electronic Journal, 2017

We theoretically and experimentally study an investment game with fundamental state uncertainty a... more We theoretically and experimentally study an investment game with fundamental state uncertainty and input complementarities-i.e., a global game environment. Our particular focus is on how a sentiment index, closely modeled after consumer confidence surveys, aggregates private information and influences investment. We find that a sentiment index produces very similar results to a highly informative public signal regarding the underyling state. Both forms of public signals-one exogenous and highly precise, the other endogenous and noisier-increase investment in a range of states where public information can induce multiplicity of equilibria. The sentiment index also increases investment in some states in which the public signal does not. We also observe significant heterogeneity between groups in their mappings of private signals into sentiment reports.

The choice of strategies by bidders who are allowed to communicate in auctions is studied. Using ... more The choice of strategies by bidders who are allowed to communicate in auctions is studied. Using the tools of mechanism design, the possible outcomes of communication between bidders participating in a series of simultaneous first-price auctions are investigated. A variety of mechanisms are incentive compatible when side payments are not allowed. When attention is restricted to mechanisms that rely only on bidders' ordinal ranking of markets, incentive compatibility is characterized and the ranking mechanism of Pesendorfer (1996) is interim incentive efficient.

The choice of strategies by bidders who are allowed to communicate in auctions is studied. Using ... more The choice of strategies by bidders who are allowed to communicate in auctions is studied. Using the t o o l s o f m e c hanism design, the possible outcomes of communication between bidders participating in a series of simultaneous rst-price auctions are investigated. A variety of mechanisms are incentive compatible when side payments are not allowed. When attention is restricted to mechanisms that rely only on bidders' ordinal ranking of markets, incentive compatibility i s c haracterized and the ranking mechanism of Pesendorfer (1996) is interim incentive e cient. Laboratory experiments were completed to investigate the existence, stability, and e ect on bidder and seller surplus of cooperative agreements in multiple object simultaneous rst-price auctions. Collusive agreements stable in the laboratory. The choices of the experimental subjects often closely match the choices predicted by the ranking and serial dictator mechanisms presented earlier. However, a few notable exceptions raise interesting prospects for the theoretical development of models of cooperative behavior.

SSRN Electronic Journal, 2012

ABSTRACT When bidders incur a cost to learn their valuations, bidder entry can impact auction per... more ABSTRACT When bidders incur a cost to learn their valuations, bidder entry can impact auction performance. Two common selling mechanisms in this environment are an English auction, and a sequential bidding process. Bulow and Klemperer (2009) show, theoretically, that sellers should prefer the auction, because it generates higher expected revenues, while bidders should prefer the sequential mechanism, because it generates higher expected bidder profits. We compare the two mechanisms in a controlled laboratory environment, varying the entry cost, and find that, contrary to the theoretical predictions, average seller revenues tend to be higher under the sequential mechanism, while average bidder profits are approximately the same. We identify three systematic behavioral deviations from the theoretical model: (1) in the auction, bidders do not enter 100% of the time, (2) in the sequential mechanism, bidders do not set pre-emptive bids according to the predicted threshold strategy, and (3) subsequent bidders tend to over-enter in response to pre-emptive bids by first bidders. We develop a model of noisy bidder entry costs that is consistent with these behaviors, and show that our model organizes the experimental data well.

The choice of strategies by bidders who are allowed to communi- cate in auctions is studied. Usin... more The choice of strategies by bidders who are allowed to communi- cate in auctions is studied. Using the tools of mechanism design, the possible outcomes of communication between bidders participating in a series of simultaneous first-price auctions are investigated. A variety of mechanisms are incentive compatible when side payments are not allowed. When attention is restricted to mechanisms that rely

We examine the effectiveness of asset markets when the final outcome upon which the asset payout ... more We examine the effectiveness of asset markets when the final outcome upon which the asset payout is based maybe affected by the unobservable actions of the traders. Players participate in a minimum effort coordination game preceeded by an information market where the asset payoffs are determined by the observed minimum effort level in the subsequent game. We examine both the informativeness of the markets and the effect of the market upon the ultimate outcome in the coordination game. This research provides insights into both equilibrium selection and the application of prediction markets within organizations as a decision support tool.

We analyze two mechanisms commonly used for selling an asset or a contract, in a setting in which... more We analyze two mechanisms commonly used for selling an asset or a contract, in a setting in which bidders must incur an entry cost in order to learn how much the asset is worth to them: an English auction, and a sequential bidding process. A theory developed by Bulow and Klemperer (2009) predicts that sellers should prefer the auction, because it generates higher average revenues, while bidders should prefer the sequential mechanism, because it generates higher average bidder profits. We compare the two mechanisms in a controlled laboratory environment, varying the entry cost, and find that, contrary to the theoretical predictions, average seller revenues tend to be the same or higher under the sequential mechanism, while average bidder profits are approximately the same. We identify three behavioral causes that explain our result: (1) bidders do not enter the auction 100% of the time, and (2) in the sequential mechanism, bidders do not set pre-emptive bids according to the threshold strategy, and (3) the subsequent bidders tend to over-enter in response to pre-emptive bids by the first bidders. We develop a model of noisy bidder entry decisions, related to quantal response equilibrium, and show, using maximum-likelihood parameter estimation techniques, that our model does a good job in organizing the experimental data, both, in terms of point predictions, as well as in terms of qualitiaitve comparisons of the two mechanisms.

We investigate the role of timing in ascending auctions under the premise that time is a valuable... more We investigate the role of timing in ascending auctions under the premise that time is a valuable resource. Traditional models of the English auction ignore timing issues by assuming that the auction occurs instantaneously. However, when auctions are slow, as internet auctions used for procurement often are, there are significant opportunity or monitoring costs to bidders, and the choice of the bid increment level becomes a strategic decision. We study the choice of bid increments in the experimental laboratory by systematically altering the opportunity costs associated with fast bidding. We find that when time is more valuable bidders respond by bidding larger increments. Surprisingly, the economic performance of the auction is not significantly affected. We develop a simple model of ascending auctions with impatient bidders that provides insights into the effect bid increments have on auction performance.

Southern Economic Journal, 2011

We examine the voluntary provision of a public project via binary contributions when contribution... more We examine the voluntary provision of a public project via binary contributions when contributions may be made over multiple periods. In many situations, early contributors are likely to pay a higher cost than those who wait. We show that in such circumstances the provision of the project always involves delay. Since this game involves coordination on complex, dynamic strategies in the face of asymmetries in payoffs, we examine behavior in the laboratory.

SSRN Electronic Journal, 2010

We report results from an economic experiment where two markets institutions for controlling wate... more We report results from an economic experiment where two markets institutions for controlling water pollution are compared. In the status quo institution, permit trades between point and nonpoint sources are subject to a trading ratio. In the alternative, nonpoint abatements are converted into permits with multiple attributes. The test bed captures important features of existing markets for water quality trading. First, pollution is stochastic, poorly observed and imperfectly controlled by nonpoints. Second, the market is characterized by oligopsony. The results indicate that the multi-attribute market generates a superior environmental outcome to the trading ratio market. Furthermore, the average cost of pollution control is lower in the multi-attribute market. Market power is found to be independent of the type of market institution, but sellers of permits learn to resist market power as they gain experience. This is at the cost of market efficiency since their resistance reduces the number of trades.

The Economic Journal, 2007

We study bidder collusion and test the power of payoff dominance as an equilibrium selection prin... more We study bidder collusion and test the power of payoff dominance as an equilibrium selection principle in experimental multi-object ascending auctions. In these institutions low-price collusive equilibria exist along with competitive payoff-inferior equilibria. Achieving payoff-superior collusive outcomes requires complex strategies that, depending on the environment, may involve signaling, market splitting, and bid rotation. We provide the first systematic evidence of successful bidder collusion in such complex environments without communication. The results demonstrate that in repeated settings bidders are often able to coordinate on payoff superior outcomes, with the choice of collusive strategies varying systematically with the environment.

Production and Operations Management, 2009

We investigate the role of timing in ascending auctions under the premise that time is a valuable... more We investigate the role of timing in ascending auctions under the premise that time is a valuable resource. Traditional models of the English auction ignore timing issues by assuming that the auction occurs instantaneously. However, when auctions are slow, as internet auctions used for procurement often are, there are significant opportunity or monitoring costs to bidders, and the choice of the size of the jump bid becomes a strategic decision. We study this choice in the experimental laboratory by systematically varying the opportunity costs associated with fast bidding. We find that when time is more valuable bidders respond by choosing larger jump bids. Surprisingly, the economic performance of the auction is not significantly affected. We develop a simple model of ascending auctions with impatient bidders that provides insights into the effect jump bids have on auction performance.

Naval Research Logistics, 2008

In this paper we explore how two competing firms locate and set capacities to serve timesensitive... more In this paper we explore how two competing firms locate and set capacities to serve timesensitive customers. Because customers are time-sensitive, they may decline to place an order from either competitor if their expected waiting time is large. We develop a two-stage game where firms set capacities and then locations, and show that three types of subgame perfect equilibria are possible: local monopoly (in which each customer is served by a single firm, but some customers may be left unserved), constrained local monopoly (in which firms serve the entire interval of customers but do not compete with each other), and constrained competition (in which firms also serve the entire interval of customers, but now compete for some customers). We perform a comparative statics analysis to illustrate differences in the equilibrium behavior of a duopolist and a coordinated monopolist. * We thank the Associate Editor, two anonymous referees, Mike Pangburn, and Shankar Sunderasan for their valuable comments. The order of the authors is alphabetical.

Management Science, 2005

In this paper we present a new improved design for multiobject auctions and report on the results... more In this paper we present a new improved design for multiobject auctions and report on the results of experimental tests of that design. We merge the better features of two extant but very different auction processes, the Simultaneous Multiple Round (SMR) design used by the FCC to auction the electromagnetic spectrum and the Adaptive User Selection Mechanism (AUSM) of Banks et al. (1989, “Allocating uncertain and unresponsive resources: An experimental approach,” RAND Journal of Economics, Vol. 20, No. 1, pp. 1–25). Then, by adding one crucial new feature, we are able to create a new design, the Resource Allocation Design (RAD) auction process, which performs better than both. Our experiments demonstrate that the RAD auction achieves higher efficiencies, lower bidder losses, higher net revenues, and faster times to completion without increasing the complexity of a bidder's problem.

Management Science, 2011

W e investigate how auctioneers set reserve prices in auctions. A well-established theoretical re... more W e investigate how auctioneers set reserve prices in auctions. A well-established theoretical result, assuming risk neutrality of the seller, is that the optimal reserve price should not depend on the number of participating bidders. In a set of controlled laboratory experiments, we find that seller behavior often deviates from the theoretical benchmarks. We extend the existing theory to explore three alternative explanations for our results: risk aversion, anticipated regret, and probability weighting. After fitting our data to each of these models through parameter estimation techniques on both an aggregate and individual level, we find that all three models are consistent with some of the characteristics of our data, but that the regret model provides a slightly more favorable fit overall.

Production and Operations Management, Jan 5, 2009

We investigate the role of timing in ascending auctions under the premise that time is a valuable... more We investigate the role of timing in ascending auctions under the premise that time is a valuable resource. Traditional models of the English auction ignore timing issues by assuming that the auction occurs instantaneously. However, when auctions are slow, as internet auctions used for procurement often are, there are significant opportunity or monitoring costs to bidders, and the choice of the size of the jump bid becomes a strategic decision. We study this choice in the experimental laboratory by systematically varying the opportunity costs associated with fast bidding. We find that when time is more valuable bidders respond by choosing larger jump bids. Surprisingly, the economic performance of the auction is not significantly affected. We develop a simple model of ascending auctions with impatient bidders that provides insights into the effect jump bids have on auction performance.

Experimental Economics, Jul 14, 2007

We study the role of timing in auctions under the premise that time is a valuable resource. When ... more We study the role of timing in auctions under the premise that time is a valuable resource. When one object is for sale, Dutch and first-price sealed bid auctions are strategically equivalent in standard models, and therefore, they should yield the same revenue for the auctioneer. We study Dutch and first-price sealed bid auctions in the laboratory, with a specific emphasis on the speed of the clock in the Dutch auction. At fast clock speeds, revenue in the Dutch auction is significantly lower than it is in the sealed bid auction. When the clock is sufficiently slow, however, revenue in the Dutch auction is higher than the revenue in the sealed bid auction. We develop and test a simple model of auctions with impatient bidders that is consistent with these laboratory findings. Keywords Auctions • Experimental economics JEL Classification D44 • C91 1 Introduction and related literature The popularity of Internet auctions, such as eBay, has made timing issues in auctions particularly salient. Traditionally, auction houses, such as Christie's, required bidders or their representatives to assemble at a specific place and time, and therefore

We analyze two mechanisms commonly used for selling an asset or a contract, in a setting in which... more We analyze two mechanisms commonly used for selling an asset or a contract, in a setting in which bidders must incur an entry cost in order to learn how much the asset is worth to them: an English auction, and a sequential bidding process. A theory developed by Bulow and Klemperer (2009) predicts that sellers should prefer the auction, because it generates higher average revenues, while bidders should prefer the sequential mechanism, because it generates higher average bidder profits. We compare the two mechanisms in a controlled laboratory environment, varying the entry cost, and find that, contrary to the theoretical predictions, average seller revenues tend to be the same or higher under the sequential mechanism, while average bidder profits are approximately the same. We identify three behavioral causes that explain our result: (1) bidders do not enter the auction 100% of the time, and (2) in the sequential mechanism, bidders do not set pre-emptive bids according to the threshold strategy, and (3) the subsequent bidders tend to over-enter in response to pre-emptive bids by the first bidders. We develop a model of noisy bidder entry decisions, related to quantal response equilibrium, and show, using maximum-likelihood parameter estimation techniques, that our model does a good job in organizing the experimental data, both, in terms of point predictions, as well as in terms of qualitiaitve comparisons of the two mechanisms.

This thesis investigates the theory of cooperative behavior in the presence of asymmetric informa... more This thesis investigates the theory of cooperative behavior in the presence of asymmetric information. Traditionally, the core has been a powerful and much used solution concept to describe cooperative outcomes. In settings where agents have some private information, it may be appropriate to include the opportunity for communication in the development of the core. I study the relationship of various core solution concepts with prevalent noncooperative solution concepts for environments with asymmetric information. The core definitions examined vary by the level of communication assumed. In Chapter 2, I investigate the welfare properties of market equilibria. I demonstrate that appropriate communication restrictions can be placed on the core (and efficiency) in order to obtain first and second welfare theorems. In Chapter 3, I discuss the Bayesian implementation of core solutions. If full communication is assumed, Palfrey and Srivastava (1987) have shown that the core is not Bayesian...

SSRN Electronic Journal, 2017

We theoretically and experimentally study an investment game with fundamental state uncertainty a... more We theoretically and experimentally study an investment game with fundamental state uncertainty and input complementarities-i.e., a global game environment. Our particular focus is on how a sentiment index, closely modeled after consumer confidence surveys, aggregates private information and influences investment. We find that a sentiment index produces very similar results to a highly informative public signal regarding the underyling state. Both forms of public signals-one exogenous and highly precise, the other endogenous and noisier-increase investment in a range of states where public information can induce multiplicity of equilibria. The sentiment index also increases investment in some states in which the public signal does not. We also observe significant heterogeneity between groups in their mappings of private signals into sentiment reports.

The choice of strategies by bidders who are allowed to communicate in auctions is studied. Using ... more The choice of strategies by bidders who are allowed to communicate in auctions is studied. Using the tools of mechanism design, the possible outcomes of communication between bidders participating in a series of simultaneous first-price auctions are investigated. A variety of mechanisms are incentive compatible when side payments are not allowed. When attention is restricted to mechanisms that rely only on bidders' ordinal ranking of markets, incentive compatibility is characterized and the ranking mechanism of Pesendorfer (1996) is interim incentive efficient.

The choice of strategies by bidders who are allowed to communicate in auctions is studied. Using ... more The choice of strategies by bidders who are allowed to communicate in auctions is studied. Using the t o o l s o f m e c hanism design, the possible outcomes of communication between bidders participating in a series of simultaneous rst-price auctions are investigated. A variety of mechanisms are incentive compatible when side payments are not allowed. When attention is restricted to mechanisms that rely only on bidders' ordinal ranking of markets, incentive compatibility i s c haracterized and the ranking mechanism of Pesendorfer (1996) is interim incentive e cient. Laboratory experiments were completed to investigate the existence, stability, and e ect on bidder and seller surplus of cooperative agreements in multiple object simultaneous rst-price auctions. Collusive agreements stable in the laboratory. The choices of the experimental subjects often closely match the choices predicted by the ranking and serial dictator mechanisms presented earlier. However, a few notable exceptions raise interesting prospects for the theoretical development of models of cooperative behavior.

SSRN Electronic Journal, 2012

ABSTRACT When bidders incur a cost to learn their valuations, bidder entry can impact auction per... more ABSTRACT When bidders incur a cost to learn their valuations, bidder entry can impact auction performance. Two common selling mechanisms in this environment are an English auction, and a sequential bidding process. Bulow and Klemperer (2009) show, theoretically, that sellers should prefer the auction, because it generates higher expected revenues, while bidders should prefer the sequential mechanism, because it generates higher expected bidder profits. We compare the two mechanisms in a controlled laboratory environment, varying the entry cost, and find that, contrary to the theoretical predictions, average seller revenues tend to be higher under the sequential mechanism, while average bidder profits are approximately the same. We identify three systematic behavioral deviations from the theoretical model: (1) in the auction, bidders do not enter 100% of the time, (2) in the sequential mechanism, bidders do not set pre-emptive bids according to the predicted threshold strategy, and (3) subsequent bidders tend to over-enter in response to pre-emptive bids by first bidders. We develop a model of noisy bidder entry costs that is consistent with these behaviors, and show that our model organizes the experimental data well.

The choice of strategies by bidders who are allowed to communi- cate in auctions is studied. Usin... more The choice of strategies by bidders who are allowed to communi- cate in auctions is studied. Using the tools of mechanism design, the possible outcomes of communication between bidders participating in a series of simultaneous first-price auctions are investigated. A variety of mechanisms are incentive compatible when side payments are not allowed. When attention is restricted to mechanisms that rely

We examine the effectiveness of asset markets when the final outcome upon which the asset payout ... more We examine the effectiveness of asset markets when the final outcome upon which the asset payout is based maybe affected by the unobservable actions of the traders. Players participate in a minimum effort coordination game preceeded by an information market where the asset payoffs are determined by the observed minimum effort level in the subsequent game. We examine both the informativeness of the markets and the effect of the market upon the ultimate outcome in the coordination game. This research provides insights into both equilibrium selection and the application of prediction markets within organizations as a decision support tool.

We analyze two mechanisms commonly used for selling an asset or a contract, in a setting in which... more We analyze two mechanisms commonly used for selling an asset or a contract, in a setting in which bidders must incur an entry cost in order to learn how much the asset is worth to them: an English auction, and a sequential bidding process. A theory developed by Bulow and Klemperer (2009) predicts that sellers should prefer the auction, because it generates higher average revenues, while bidders should prefer the sequential mechanism, because it generates higher average bidder profits. We compare the two mechanisms in a controlled laboratory environment, varying the entry cost, and find that, contrary to the theoretical predictions, average seller revenues tend to be the same or higher under the sequential mechanism, while average bidder profits are approximately the same. We identify three behavioral causes that explain our result: (1) bidders do not enter the auction 100% of the time, and (2) in the sequential mechanism, bidders do not set pre-emptive bids according to the threshold strategy, and (3) the subsequent bidders tend to over-enter in response to pre-emptive bids by the first bidders. We develop a model of noisy bidder entry decisions, related to quantal response equilibrium, and show, using maximum-likelihood parameter estimation techniques, that our model does a good job in organizing the experimental data, both, in terms of point predictions, as well as in terms of qualitiaitve comparisons of the two mechanisms.

We investigate the role of timing in ascending auctions under the premise that time is a valuable... more We investigate the role of timing in ascending auctions under the premise that time is a valuable resource. Traditional models of the English auction ignore timing issues by assuming that the auction occurs instantaneously. However, when auctions are slow, as internet auctions used for procurement often are, there are significant opportunity or monitoring costs to bidders, and the choice of the bid increment level becomes a strategic decision. We study the choice of bid increments in the experimental laboratory by systematically altering the opportunity costs associated with fast bidding. We find that when time is more valuable bidders respond by bidding larger increments. Surprisingly, the economic performance of the auction is not significantly affected. We develop a simple model of ascending auctions with impatient bidders that provides insights into the effect bid increments have on auction performance.

Southern Economic Journal, 2011

We examine the voluntary provision of a public project via binary contributions when contribution... more We examine the voluntary provision of a public project via binary contributions when contributions may be made over multiple periods. In many situations, early contributors are likely to pay a higher cost than those who wait. We show that in such circumstances the provision of the project always involves delay. Since this game involves coordination on complex, dynamic strategies in the face of asymmetries in payoffs, we examine behavior in the laboratory.

SSRN Electronic Journal, 2010

We report results from an economic experiment where two markets institutions for controlling wate... more We report results from an economic experiment where two markets institutions for controlling water pollution are compared. In the status quo institution, permit trades between point and nonpoint sources are subject to a trading ratio. In the alternative, nonpoint abatements are converted into permits with multiple attributes. The test bed captures important features of existing markets for water quality trading. First, pollution is stochastic, poorly observed and imperfectly controlled by nonpoints. Second, the market is characterized by oligopsony. The results indicate that the multi-attribute market generates a superior environmental outcome to the trading ratio market. Furthermore, the average cost of pollution control is lower in the multi-attribute market. Market power is found to be independent of the type of market institution, but sellers of permits learn to resist market power as they gain experience. This is at the cost of market efficiency since their resistance reduces the number of trades.

The Economic Journal, 2007

We study bidder collusion and test the power of payoff dominance as an equilibrium selection prin... more We study bidder collusion and test the power of payoff dominance as an equilibrium selection principle in experimental multi-object ascending auctions. In these institutions low-price collusive equilibria exist along with competitive payoff-inferior equilibria. Achieving payoff-superior collusive outcomes requires complex strategies that, depending on the environment, may involve signaling, market splitting, and bid rotation. We provide the first systematic evidence of successful bidder collusion in such complex environments without communication. The results demonstrate that in repeated settings bidders are often able to coordinate on payoff superior outcomes, with the choice of collusive strategies varying systematically with the environment.

Production and Operations Management, 2009

We investigate the role of timing in ascending auctions under the premise that time is a valuable... more We investigate the role of timing in ascending auctions under the premise that time is a valuable resource. Traditional models of the English auction ignore timing issues by assuming that the auction occurs instantaneously. However, when auctions are slow, as internet auctions used for procurement often are, there are significant opportunity or monitoring costs to bidders, and the choice of the size of the jump bid becomes a strategic decision. We study this choice in the experimental laboratory by systematically varying the opportunity costs associated with fast bidding. We find that when time is more valuable bidders respond by choosing larger jump bids. Surprisingly, the economic performance of the auction is not significantly affected. We develop a simple model of ascending auctions with impatient bidders that provides insights into the effect jump bids have on auction performance.

Naval Research Logistics, 2008

In this paper we explore how two competing firms locate and set capacities to serve timesensitive... more In this paper we explore how two competing firms locate and set capacities to serve timesensitive customers. Because customers are time-sensitive, they may decline to place an order from either competitor if their expected waiting time is large. We develop a two-stage game where firms set capacities and then locations, and show that three types of subgame perfect equilibria are possible: local monopoly (in which each customer is served by a single firm, but some customers may be left unserved), constrained local monopoly (in which firms serve the entire interval of customers but do not compete with each other), and constrained competition (in which firms also serve the entire interval of customers, but now compete for some customers). We perform a comparative statics analysis to illustrate differences in the equilibrium behavior of a duopolist and a coordinated monopolist. * We thank the Associate Editor, two anonymous referees, Mike Pangburn, and Shankar Sunderasan for their valuable comments. The order of the authors is alphabetical.

Management Science, 2005

In this paper we present a new improved design for multiobject auctions and report on the results... more In this paper we present a new improved design for multiobject auctions and report on the results of experimental tests of that design. We merge the better features of two extant but very different auction processes, the Simultaneous Multiple Round (SMR) design used by the FCC to auction the electromagnetic spectrum and the Adaptive User Selection Mechanism (AUSM) of Banks et al. (1989, “Allocating uncertain and unresponsive resources: An experimental approach,” RAND Journal of Economics, Vol. 20, No. 1, pp. 1–25). Then, by adding one crucial new feature, we are able to create a new design, the Resource Allocation Design (RAD) auction process, which performs better than both. Our experiments demonstrate that the RAD auction achieves higher efficiencies, lower bidder losses, higher net revenues, and faster times to completion without increasing the complexity of a bidder's problem.