The Chopstick Auction: A Study of the Exposure Problem in Multi-Unit Auctions

By Florian Englmaier, Pablo Guillén, Loreto Llorente, S. Onderstal, Rupert Sausgruber. Social Science Research Network, 2009

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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].

Subfields: Management Information Systems, Management Science and Operations Research, Safety Research

View Paper: https://www.semanticscholar.org/paper/0b5ed273d85bc0c41cf39fe54177c06418b335b2