VCG mechanism for multi-unit auctions and appearance of information: a subject experiment

This paper investigates whether, in multi-unit auctions, different types of appearance of information associated with bidding generate different levels of allocative efficiency and sellers' revenue when the VCG mechanism is applied to human subject experiments of those auctions. We examine two types of appearance of information about bidders' valuations of the item given to them and the bids they are asked to submit: One type is unit valuations and the unit bids themselves and the other type is unit valuations and the unit bids multiplied by the number of units. We observed that there was no significant difference on average in either allocative efficiency or the seller's revenue between these two types of appearance of information. Rather, for each appearance of information, there was a significant difference in subjects' bidding behavior between different display types of draws of unit valuations. This behavioral difference, however, did not significantly affect allocative efficiency. The performance of the VCG mechanism is robust against display types of those draws as well as against types of appearance of information.