- Keeping out Trojan horses: auctions and bankruptcy in the laboratory
- Number of pages
- Amsterdam / Rotterdam: Tinbergen Institute
- Tinbergen Institute Discussion Paper
- Volume | Edition (Serie)
- TI 2011-024/1
- Document type
- Working paper
- Faculty of Economics and Business (FEB)
- Amsterdam School of Economics Research Institute (ASE-RI)
If a government auctions the right to market a good, continuity is likely to be of significant importance. In a laboratory experiment, we compare the effects of bidders' limited liability in the first-price sealed-bid auction and the English auction in a common value setting. Our data strongly reject our theoretical prediction that the English auction leads to less aggressive bids and fewer bankruptcies than the first-price sealed-bid auction. X-cursedness gives a robust explanation of our experimental observations, in contrast to risk aversion and asymmetric equilibria.
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