Fixed price plus rationing: an experiment

Journal article


Publication Details

Author(s): Grimm V, Kovarik J, Ponti G
Journal: Experimental Economics
Publisher: Springer Verlag (Germany)
Publication year: 2008
Volume: 11
Journal issue: 4
Pages range: 402-422
ISSN: 1386-4157


Abstract


This paper theoretically and experimentally explores a fixed price mechanism in which, if aggregate demand exceeds supply, bidders are proportionally rationed. If demand is uncertain, in equilibrium bidders overstate their true demand in order to alleviate the effects of being rationed. This effect is the more intense the lower the price, and bids reach their upper limit for sufficiently low prices. In the experiment we observe a significant proportion of equilibrium play. However, subjects tend to overbid the equilibrium strategy when prices are high and underbid when prices are low. We explain the experimental evidence by a simple model in which the probability of a deviation is decreasing in the expected loss associated with it.



FAU Authors / FAU Editors

Grimm, Veronika Prof. Dr.
Lehrstuhl für Volkswirtschaftslehre, insbesondere Wirtschaftstheorie


How to cite

APA:
Grimm, V., Kovarik, J., & Ponti, G. (2008). Fixed price plus rationing: an experiment. Experimental Economics, 11(4), 402-422. https://dx.doi.org/10.1007/s10683-007-9184-y

MLA:
Grimm, Veronika, Jaromir Kovarik, and Giovanni Ponti. "Fixed price plus rationing: an experiment." Experimental Economics 11.4 (2008): 402-422.

BibTeX: 

Last updated on 2018-19-04 at 02:44