Experimental Auction Study

1. Experimental Auction Study

2. EXPERIMENTAL Sealed-Bid Auction

3. My Value HK$XXX EXAMPLE My Bid

4. EXPERIMENTAL Sealed-Bid Auction

5. Questions?

6. Ready?

7. Go

8. Japanese Auction Price Level = $ 0.00 Please raise your hand if you’re active

9. Japanese Auction Price Level = $ 10.00 Please raise your hand if you’re active

10. Japanese Auction Price Level = $ 20.00 Please raise your hand if you’re active

11. Japanese Auction Price Level = $ 30.00 Please raise your hand if you’re active

12. Japanese Auction • At every price level you can raise your hard to indicate that you are active. Otherwise, you abandon the possibility of purchasing the item • Auction ends when there is one or no active bidders remaining • If one is left, item is sold at that price • If none is left, item is sold at the previous price to a randomly selected active bidder at that price level

13. Questions?

14. Ready?

15. Go

16. Japanese Auction Price Level = $ 0.00 Please raise your hand if you’re active

17. Japanese Auction Price Level = $ 10.00 Please raise your hand if you’re active

18. Japanese Auction Price Level = $ 20.00 Please raise your hand if you’re active

19. Japanese Auction Price Level = $ 30.00 Please raise your hand if you’re active

20. Japanese Auction Price Level = $ 40.00 Please raise your hand if you’re active

21. Japanese Auction Price Level = $ 50.00 Please raise your hand if you’re active

22. Japanese Auction Price Level = $ 60.00 Please raise your hand if you’re active

23. Japanese Auction Price Level = $ 70.00 Please raise your hand if you’re active

24. Japanese Auction Price Level = $ 80.00 Please raise your hand if you’re active

25. Japanese Auction Price Level = $ 90.00 Please raise your hand if you’re active

26. A Little Theory • In the Japanese auction, exiting when price level exceeds your value is the optimal strategy • This auction is theoretically efficient • Item sold to the bidder who values it most • No gain from secondary trading • In the sealed-bid auction, people generally shade, and the buyer may not value the item most.

27. Summary • Science comprises both a theoretical and an experimental side • Best practice in engineering incorporates wind-tunnel/test-bed – a natural role for laboratory experiments in business strategy and government policy. • Smart market – which is smarter? Japanese or Sealed-bid? • Pedagogical tool to complement existing approaches in the teaching of economics, business related disciplines, aid the social and behavioral sciences