Self-Confirming Price Prediction for Bidding in Simultaneous Ascending Auctions

Simultaneous, separate ascending auctions are ubiquitous, even when agents have preferences over combinations of goods, from which arises the emph{exposure problem}. Little is known about strategies that perform well when the exposure problem is important. We present a new family of bidding strategies for this situation, in which agents form and utilize various amounts of information from predictions of the distribution of final prices. The predictor strategies we define differ in their choice of method for generating the initial (pre-auction) prediction. We explore several methods, but focus on emph{self-confirming} predictions. An agents prediction of characteristics of the distribution of closing prices is self-confirming if, when all agents follow the same predictor bidding strategy, the final price distributions that actually result are consistent with the utilized characteristics of the prediction. We extensively analyze an auction environment with five goods, and five agents who each can choose from 53 different bidding strategies (resulting in over 4.2 million distinct strategy combinations). We find that the self-confirming distribution predictor is a highly stable, pure-strategy Nash equilibrium. We have been unable to find any other Nash strategies in this environment. In limited experiments in other environments the self-confirming distribution predictor consistently performs well, but is not generally a pure-strategy Nash equilibrium

Self-Confirming Price Prediction for Bidding in Simultaneous Ascending Auctions

Simultaneous, separate ascending auctions are ubiquitous, even when agents have preferences over combinations of goods, from which arises the emph{exposure problem}. Little is known about strategies that perform well when the exposure problem is important. We present a new family of bidding strategies for this situation, in which agents form and utilize various amounts of information from predictions of the distribution of final prices. The predictor strategies we define differ in their choice of method for generating the initial (pre-auction) prediction. We explore several methods, but focus on emph{self-confirming} predictions. An agents prediction of characteristics of the distribution of closing prices is self-confirming if, when all agents follow the same predictor bidding strategy, the final price distributions that actually result are consistent with the utilized characteristics of the prediction. We extensively analyze an auction environment with five goods, and five agents who each can choose from 53 different bidding strategies (resulting in over 4.2 million distinct strategy combinations). We find that the self-confirming distribution predictor is a highly stable, pure-strategy Nash equilibrium. We have been unable to find any other Nash strategies in this environment. In limited experiments in other environments the self-confirming distribution predictor consistently performs well, but is not generally a pure-strategy Nash equilibrium

Three Minimal Market Institutions with Human and Algorithmic Agents: Theory and Experimental Evidence

We define and examine three minimal market games (sell-all, buy-sell, and double auction) in the laboratory relative to the predictions of theory. These closed exchange economies have some cash to facilitate transactions, and include feedback. The experiment reveals that (1) the competitive general equilibrium (CGE) and non-cooperative (NCE) models are reasonable anchors to locate most but not all the observed outcomes of the three market mechanisms; (2) outcomes tend to get closer to CGE predictions as the number of players increases; (3) prices and allocations in double auctions deviate persistently from CGE predictions; (4) the outcome paths across the three market mechanisms differ significantly and persistently; (5) importance of market structures for outcomes is reinforced by algorithmic trader simulations; and (6) none of the three markets dominates the others across six measures of performance. Inclusion of some mechanism differences into theory may enhance our understanding of important aspects of markets.Strategic market games, Laboratory experiments, Minimally intelligent agents, Adaptive learning agents, General equilibrium

Do Liars Believe? Beliefs and Other-Regarding Preferences in Sender-Receiver Games

We examine subjects‟ behavior in sender-receiver games where there are gains from trade and alignment of interests in one of the two states. We elicit subjects‟ beliefs, risk and other-regarding preferences. Our design also allows us to examine the behavior of subjects in both roles, to determine whether the behavior in one role is the best response to the subject‟s own behavior in the other role. The results of the experiment indicate that 60 percent of senders adopt deceptive strategies by sending favorable message when the true state of the nature is unfavorable. Nevertheless, 67 percent of receivers invest conditional upon a favorable message. The investing behavior of receivers cannot be explained by risk preferences or as a best response to subject‟s own behavior in the sender‟s role. However, it can be rationalized by accounting for elicited beliefs and other-regarding preferences. Finally, the honest behavior of some senders can be explained by other-regarding preferences. Thus we find liars do believe, and individuals who care about the payoffs of others tend to be honest

Do Liars Believe? Beliefs And Other-Regarding Preferences In Sender-Receiver Games

We examine subjects’ behavior in sender–receiver games where there are gains from trade and alignment of interests in one of the two states. We elicit subjects’ beliefs, risk and other-regarding preferences. Our design also allows us to examine the behavior of subjects in both roles, to determine whether the behavior in one role is the best response to the subject\u27s own behavior in the other role. The results of the experiment indicate that, when acting as senders, the majority of subjects adopt deceptive strategies by sending favorable message when the true state of the nature is unfavorable. When acting as receivers, the majority of subjects invest conditional upon receiving a favorable message. The investing behavior of receivers cannot be explained by risk preferences or as a best response to subject\u27s own behavior in the sender\u27s role. However, it can be rationalized by accounting for elicited beliefs and other-regarding preferences. Finally, the honest behavior of some senders can be explained by other-regarding preferences. Thus, we that find liars do believe, and that individuals who care about the payoffs of others tend to be honest

Transparency, Efficiency and the Distribution of Economic Welfare in Pass-Through Investment Trust Games

We design an experiment to examine welfare and behavior in a multi-level trust game representing a pass through investment in an intermediated market. In a repeated game, an Investor invests via an Intermediary who lends to a Borrower. A pre-experiment one-shot version of the game serves as a baseline and to type each subject. We alter the transparency of exchanges between non-adjacent parties. We find transparency of the exchanges between the investor and intermediary does not significantly affect welfare. However, transparency regarding exchanges between the intermediary and borrower promotes trust on the part of the investor, increasing welfare. Further, this has asymmetric effects: borrowers and intermediaries achieve greater welfare benefits than investors. We discuss implications for what specific aspects of financial market transparency may facilitate more efficiency.financial intermediation, financial market transparency, pass through securities, multi-level trust games, experiments

The Role of Auctions in Allocating Public Resources

This paper provides an economic framework within which to consider the effectiveness and limitations of auction markets. The paper looks at the use of auctions as a policy instrument and the effects of auction design on consumer interests, the efficient allocation of resources, and industry competitiveness.Australia; Research; Ascending-bid auction; Auctions; Bidders; Conservation funds; Descending-bid auction; Dutch auction; English auction; Environmental Management; First-price sealed-bid auction; Infrastructure; Markets; Oral auction; Outcry auction; Pollutant emission permits; Power supply contracts; Public resources; Radio- spectrum; Second-price sealed-bid auction Spectrum licences; Vickrey auction; Water rights;