Seifert, Stefan; Strecker, Stefan:

Over- and underbidding in Vickrey auctions: Do we need a new theory?

In: Arbeitsbericht
Karlsruhe: Lehrstuhl für Informationsbetriebswirtschaftslehre, Institut für Informationswirtschaft und Informationsmanagement, Universität Karlsruhe (TH) (2003)
Buchaufsatz / Kapitel / Fach: Wirtschaftswissenschaften
Abstract:
Truthful revelation of valuations is a dominant strategy in second-price
	sealed-bid auctions with private-values (Vickrey 1961). However,
	bidding above the dominant strategy price has persistently been observed
	in laboratory experiments (Kagel and Levin 1993; Harstad 2000). Harstad
	(2000) finds that “substantial overbidding by nearly all subjects
	in second-price auctions persists.” In a recent experimental study
	of a private-values procurement scenario (Strecker and Seifert 2003),
	we have analyzed a multi-attribute second-score reverse auction,
	an adaptation of the Vickrey auction to the multi-attribute case
	(Milgrom 2000). In contrast to the earlier experimental research
	mentioned above, our experiment has involved (i) a reverse auction
	in which a single buyer (bid-taker, auctioneer) solicits bids from
	multiple suppliers (bidders) and (ii) three-dimensional bids that
	are evaluated by a (monetary) utility or scoring function modelling
	the buyer’s preferences with respect to the price and two non-price
	quality attributes. This auction design awards the contract to the
	supplier, who has bid the highest utility score. He produces and
	delivers the object with the qualities offered to the buyer, but
	is paid a price such that the utility score of the transaction equals
	the second highest utility score (Vickrey principle).