Going, going, gone: competitive decision-making in Dutch auctions

In a Dutch auction, an item is offered for sale at a set maximum price. The price is then gradually lowered over a fixed interval of time until a bid is made, securing the item for the bidder at the current price. Bidders must trade-off between certainty and price: bid early to secure the item and you pay a premium; bid later at a lower price but risk losing to another bidder. These properties of Dutch auctions provide new opportunities to study competitive decision-making in a group setting. We developed a novel computerised Dutch auction platform and conducted a set of experiments manipulating volatility (fixed vs varied number of items for sale) and price reduction interval rate (step-rate). Triplets of participants ($$N=66$$ N = 66 ) competed with hypothetical funds against each other. We report null effects of step-rate and volatility on bidding behaviour. We developed a novel adaptation of prospect theory to account for group bidding behaviour by balancing certainty and subjective expected utility. We show the model is sensitive to variation in auction starting price and can predict the associated changes in group bid prices that were observed in our data.

Designing Call Auction Institutions to Eliminate Price Bubbles: Is English Dutch the Best?

The bubble-and-burst pattern in asset markets is among the most replicable results in experimental economics. Using controlled laboratory experiments, we compare mispricing in markets organized by standard double auction rules with mispricing in markets organized by two alternative sets of clock auctions. The double Dutch auction, shown to be more efficient than the double auction in past commodity market experiments, does not eliminate bubbles. However, the English Dutch auction yields prices reflective of underlying fundamentals and succeeds in taming bubbles even with inexperienced traders in a declining fundamental value environment with an increasing cash-to-asset ratio. (JEL C91, D44, G12)

Channel Auctions

Standard auction formats feature either an upper bound on the equilibrium price that descends over time (as in the Dutch auction) or a lower bound on the equilibrium price that ascends over time (as in the English auction). We show that in some settings with costly information acquisition, auctions featuring both (viz., a narrowing channel of prices) outperform the standard formats. This Channel auction preserves some of benefits of both the English (truthful revelation) and Dutch (security for necessary information acquisition) auctions. Natural applications include housing, online auction sites like eBay, recording transactions on blockchains, and spectrum rights. This paper was accepted by Joshua Gans, business strategy.

Exchange Rate Management and Regime: Quo Vadis Nigeria?

This study investigated a pertinent question on the lips of every Nigerian; exchange rate regime, Quo Vadis Nigeria? Nigeria, Quo Vadis (where do we go)? under two alternative managed floating regimes; Dutch Auction System and post Dutch Auction System regimes, within the Autoregressive Distributive Lag methodology using monthly data covering from July 2002 to July 2017. The results for the full sample show that none of the selected macroeconomic variables has a significant short run relationship with the nominal effective exchange rate. In the long run, all the variables, except interbank rate, show negative relationship with nominal effective exchange rate. However, while the effects of oil prices, interbank rate and the prime lending rate are significant, the effects of inflation and stock prices are insignificant. The results for the Dutch Auction System sample show little evidence of a negative short run relationship between nominal effective exchange rate and inflation while oil prices, prime lending rate, interbank rate and stock prices all show no evidence of a short run relationship with exchange rate. On the contrary, oil prices, prime lending rates and stock prices all show significant negative long run relationship with nominal effective exchange rate. The results for the post Dutch Auction System sample show evidence of a positive short run relationship between stock prices, interbank rate and nominal effective exchange rate. On the other hand, inflation, oil prices and prime lending rate show no short run relationship nominal effective exchange rate. However, there is evidence of a lagged positive relationship between inflation and nominal exchange rate. The cointegration test for post Dutch Auction System sample gives inconclusive results. We therefore, conclude that the choice of exchange rate regime matters for macroeconomics performance in Nigeria and that the closure of the Dutch Auction system by the monetary authorities significantly altered the relationship between nominal exchange effective exchange rate and macroeconomic variables.

Is Dutch Auction Suitable for Decomposable Tasks in Competitive Crowdsourcing Markets?

Competitive crowdsourcing is a popular strategic model for solving tasks in an efficient economical way. Competitive crowdsourcing platforms generally choose the winners for a single indivisible task following the conventional Dutch auction to minimize the cost. In this paper, we show that when the tasks are decomposable such mechanisms become biased for competitive crowdsourcing markets. As a solution to this, we suggest a variant of the Dutch auction (referred to as time-invariant Dutch auction) for solving decomposable tasks. Overall, some new insights about the mechanism design for competitive crowdsourcing markets are obtained.