This paper is concerned with multi-object, multi-unit auctions with a budget constrained auctioneer who has noisy value estimates for each object. We propose a new allocation mechanism, the endogenous reference price auction, with two key features. First, bids are normalized across objects using “reference prices.” Second, reference prices are set endogenously using information extracted from the bids submitted. We report on an experiment showing that a simple endogenous process mitigates value inaccuracies and improves three performance measures: the seller’s profit, allocative efficiency and total surplus. These results have important implications for large auctions used in practice.

The presence of financial constraints changes traditional auction theory predictions. In the case of multiple items, such constraints may affect revenue equivalence and efficiency of different auction formats. We consider a simple complete information setting with three financially constrained bidders and two items that have different values common to all the bidders. Using a laboratory experiment, we find that, as predicted by theory, it is more beneficial for the seller to sell the higher value item first. We then show that the first-price sealed-bid auction yields higher revenue than the English auction, with significant differences in learning of equilibrium strategies.

We provide the first direct test of how the credibility of an auction format affects bidding behavior and final outcomes. To do so, we conduct a series of laboratory experiments where the role of the seller is played by a human subject who receives the revenue from the auction and who (depending on the treatment) has agency to determine the outcome of the auction. Contrary to theoretical predictions, we find that the non-credible second-price auction fails to converge to the first-price auction. We provide a behavioral explanation for our results based on sellers’ aversion to rule-breaking, which is confirmed by an additional experiment.

Overbidding in sealed-bid second-price auctions (SPAs) has been shown to be persistent and associated with cognitive ability. We study experimentally to what extent cross-game learning can reduce overbidding in SPAs, taking into account cognitive skills. Employing an order-balanced design, we use first-price auctions (FPAs) to expose participants to an auction format in which losses from high bids are more salient than in SPAs. Experience in FPAs causes substantial cross-game learning for cognitively less able participants but does not affect overbidding for the cognitively more able. Vice versa, experiencing SPAs before bidding in an FPA does not substantially affect bidding behavior by the cognitively less able but, somewhat surprisingly, reduces bid shading by cognitively more able participants, resulting in lower profits in FPAs. Thus, ‘cross-game learning’ may rather be understood as ‘cross-game transfer’, as it has the potential to benefit bidders with lower cognitive ability whereas it has little or even adverse effects for higher-ability bidders.

In recent years, experimental economics has seen a rise in the collection and analysis of choice-process data, such as team communication transcripts. The main purpose of this paper is to understand whether the collection of team communication data influences how individuals reason and behave as they enter the team deliberation process, i.e. before any communication exchange. Such an influence would imply that team setups have limited validity to speak to individual reasoning processes. Our treatment manipulations allow us to isolate the effects of (1) belonging to a team, (2) actively suggesting an action to the team partner, and (3) justifying the suggestion in a written text to the team partner. Across three different tasks, we find no systematic evidence of changed suggestions and altered individual sophistication due to changes in aspects (1)–(3) of our experimental design. We thus find no threat to said validity of team setups. In addition to investigating how the team setup affects individual behavior before communication, we also investigate the sophistication of decisions after the communication. We find that sophisticated strategies are more persuasive than unsophisticated strategies, especially when communication includes written justifications, thereby explaining why teams are more sophisticated and proving rich communication to be fruitful.

Most multilateral bargaining models predict bargaining power to emanate from pivotality—a party’s ability to form different majority coalitions. However, this prediction contrasts with the empirical observation that negotiations in parliamentary democracies typically result in payoffs proportional to parties’ vote shares. Proportionate profits suggest equality rather than pivotality drives results. We design an experiment to study when bargaining outcomes reflect pivotality versus proportionality. We find that commitment timing is a crucial institutional factor moderating bargaining power. Payoffs are close to proportional if bargainers can commit to majority coalitions before committing to how to share the pie, but pivotality dictates outcomes otherwise. Our results help explain Gamson’s Law, a long-standing puzzle in the legislative bargaining literature.

Research from the last four decades suggests that fairness plays an important role in economic transactions. However, the vast majority of this research investigates behavior in an environment where agents are fully informed. We develop a new experimental paradigm—nesting the widely used ultimatum game—and find that fairness has less impact on outcomes when agents are less informed. As we remove information, offers become less generous and unfair offers are more likely to be accepted.

We experimentally test a model of public good bargaining due to Bowen et al. (Am Econ Rev 104:2941–2974, 2014) and compare two institutions governing bargaining over public good allocations. The setup involves two parties negotiating the distribution of a fixed endowment between a public good and each party’s individual account. Parties attach either high or low weight to the public good and the difference in these weights reflects the degree of polarization. Under discretionary bargaining rules, the status quo default allocation to the group account (in the event of disagreement) is zero while under the mandatory bargaining rule it is equal to the level last agreed upon. The mandatory rule thus creates a dynamic relationship between current decisions and future payoffs, and our experiment tests the theoretical prediction that the efficient level of public good is provided under the mandatory rule while the level of public good funding is at a sub-optimal level under the discretionary rule. Consistent with the theory, we find that proposers (particularly those attaching high weight to the public good) propose significantly greater allocations to the public good under mandatory rules than under discretionary rules and this result is strengthened with an increase in polarization. Still, public good allocations under mandatory rules fall short of steady state predictions, primarily due to fairness concerns that prevent proposers from exercising full proposer power.

We present experimental evidence for decision settings where public good providers compete for endogenous rewards which are donations (transfers) offered by outside donors. Donors receive benefits from public good provision but cannot provide the good themselves. The performance of three competition mechanisms is examined in relation to the level of public good provision and transfers offered by donors. In addition to a contest where transfers received by public good providers are proportional to effort, we study two contests with exclusion from transfers, namely a winner-takes-all and a loser-gets-nothing. We compare behavior in these three decision settings to the default setting of no-contest (no-transfers). Results for this novel decision environment with endogenous transfers show that donors offer transfers (contest prizes) at similar levels across contests and contributions to the public good are not significantly different in the three contests settings, but are consistently and significantly higher in all contests compared to the setting with no-transfers. Initially, the winner-takes-all setting leads to a significantly higher increase in public good contributions compared to the other two contests; but this difference diminishes across decision rounds.

We study the provision problem of an asymmetrically valued public project using a novel mechanism proposed by Van Essen and Walker (2017). Under this mechanism, each player simultaneously submits a price (either a contribution or a requested compensation) and a desired project quantity. In our context, two non-hosts interact with the project’s host, who gets harmed by provision. The minimum submitted quantity is provided if the contributions are sufficient to cover the building costs and the host’s requested compensation. We test the efficiency-enhancing effects of communication and find that, although it led to larger provided quantities, the probability of provision is unaffected, and the non-hosts kept most of the efficiency surplus. Moreover, the effect of communication disappears in settings where the host demands a larger compensation in equilibrium. The coding of chat logs reveals that veto threats are rare (1%), although the mechanism allows to do so. Reaching non-binding agreements and the host’s engagement with communication are positively correlated with the probability of provision.