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Vickrey auction (1961) is considered to be demand revealing as each rational bidders dominant strategy...

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Finance

Vickrey auction (1961) is considered to be demand revealing as each rational bidders dominant strategy is to bid their true value. However, experimental studies document overbidding behaviour as bidders could increase the probability of winning the auction by overbidding without adding huge costs of losing (as they pay the second highest bid). Some people criticise such results from lab experimentsthey are not that sincere in choosing their actions in the lab because they receive the monetary endowment for free. To address such a concern, propose an experimental design that can examine bidders sincere biding behaviour, given induced and independent private values and Vickrey auction in the lab. [Word limit: 500] [20 marks

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