Discrete Clock Auctions: An Experimental Study

Emel Filiz Ozbay, Peter Cramton, Erkut Y. Ozbay, and Pacharasut Sujarittanonta , Experimental Economics 15(2) , 309-322 , June 2012.

We analyze the implications of different pricing rules in discrete clock auctions. The two most common pricing rules are highest-rejected bid (HRB) and lowest-accepted bid (LAB). Under HRB, the winners pay the lowest price that clears the market; under LAB, the winners pay the highest price that clears the market. In theory, both the HRB and LAB auctions maximize revenues and are fully efficient in our setting. Our experimental results indicate that the LAB auction achieves higher revenues. This revenue result may explain the frequent use of LAB pricing. On the other hand, HRB is successful in eliciting true values of the bidders both theoretically and experimentally.