Alexander Elbittar

Impact of Valuation Ranking Information on Bidding in First-Price Auctions: A Laboratory Study

Landsberger et al. [Landsberger, M., Rubinstein, J., Wolfstetter, E., Zamir, S., 2001. First-price auctions when the ranking of valuations is common knowledge. Review of Economic Design 6, 461-480] identified optimal bidder behavior in first-price private-value auctions when the ranking of valuations is common knowledge, and they derived comparative-statics predictions regarding the auctioneers expected revenue and the efficiency of the allocation. The experiment reported here tests the behavioral components of these comparative-statics predictions. The results support the prediction that buyers are inclined to bid more aggressively when they learn they have the low value. Contrary to the theory, buyers are inclined to bid less when they learn they have the high value. Consistent with theory, the overall proportion of efficient allocations is lower than in the first-price auction before information is revealed. But as a result of high-value bidders decreasing their bids, the expected revenue does not increase on a regular basis, contrary to the theorys predictions.

Network Structure in a Link-formation Game: An Experimental Study

Network formation is frequently modeled using link-formation games and typically present a multiplicity of Nash equilibria. Cooperative refinements - such as strong or coalitional proof Nash equilibria - have been the standard tool used for equilibrium selection in these games. Non-cooperative refinements derived from the theory of global games have shown also that, for a class of payoff functions, multiplicity of equilibria disappears when the game is perturbed by introducing small amounts of incomplete information. We conducted a laboratory study evaluating the predictive power of each of these refinements in an illustrative link-formation game. Compared with cooperative game solutions, the global game approach did significantly better at predicting the strategies played by individuals in the experiment.