Implementing efficient multi-object auction institutions: An experimental study of the performance of boundedly rational agents

We study three alternative versions of the Vickrey (1961) auction when bidders have multi-unit demands: Vickrey’s original static sealed-bid auction and two dynamic implementations of the same auction: with and without dropout information reported during the auction (Ausubel, 1997). Although implemented by a weaker a weaker solution concept, behavior in the dynamic Vickrey auction with dropout information comes significantly closer to sincere bidding than either the static Vickrey auction or the dynamic auction without dropout information. This suggests a tradeoff between the simplicity and transparency of a mechanism and the strength of its solution concept for less than fully rational agents. Comparing outcomes between auction institutions provides insight into the behavioral mechanism behind this result.