- The chopstick auction: a study of the exposure problem in multi-unit auctions
- International Journal of Industrial Organization
- Volume | Issue number
- 27 | 2
- Number of pages
- Document type
- Faculty of Economics and Business (FEB)
- Amsterdam School of Economics Research Institute (ASE-RI)
Multi-unit auctions are sometimes plagued by the so-called exposure problem. In this paper, we analyze a simple game called the "chopstick auction" in which bidders are confronted with the exposure problem. We do so both in theory and in a laboratory experiment. In theory, the chopstick auction has an efficient equilibrium and is revenue equivalent with the second-price sealed-bid auction in which the exposure problem is not present. In the experiment, however, we find that the chopstick auction is less efficient than the second-price sealed-bid auction and that it yields more [the same] revenue if bidders are inexperienced [experienced].
Keywords: Chopstick auction; Exposure problem; Laboratory experiment; Second-price sealed-bid auction
JEL classification codes: C9; D44
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