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Can auctions select people by their level-k types?

Author

Listed:
  • Choo, Lawrence
  • Kaplan, Todd R.
  • Zhou, Xiaoyu
Abstract
In this paper, we seek to determine if auctions can be used to select players according to their level-k types. To do so, we embed auctions into the p-beauty contest game. We find that by using different designs, we can get the auction winners to be either the lower level-k types or the higher level-k types. In particular, when the value of winning the auction is increasing in the level-k types of all the players, higher level-k players bid higher. When the value of winning the auction is decreasing in the level-k types of all the players, the lower level-k players bid higher. Taken together, our experiment confirms that we can use auctions to select players by their level-k types. This shows that auctions can allow an economic designer to affect the outcome of a game through the selection of level-k types entering to play the game.

Suggested Citation

  • Choo, Lawrence & Kaplan, Todd R. & Zhou, Xiaoyu, 2019. "Can auctions select people by their level-k types?," MPRA Paper 95987, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:95987
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    File URL: https://mpra.ub.uni-muenchen.de/95987/1/MPRA_paper_95987.pdf
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    References listed on IDEAS

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    Cited by:

    1. Choo, Lawrence & Zhou, Xiaoyu, 2019. "Can market competition reduce anomalous behaviours," FAU Discussion Papers in Economics 08/2019, Friedrich-Alexander University Erlangen-Nuremberg, Institute for Economics.
    2. Guillaume HOLLARD & Fabien PEREZ, 2020. "Self-Selection Filters Irrationality in One-shot Games," Working Papers 2020-10, Center for Research in Economics and Statistics.
    3. Choo, Lawrence & Zhou, Xiaoyu, 2022. "Can market selection reduce anomalous behaviour in games?," European Economic Review, Elsevier, vol. 141(C).

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    More about this item

    Keywords

    p-beauty contest game; level-k; auctions; mechanism design.;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C90 - Mathematical and Quantitative Methods - - Design of Experiments - - - General
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions

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