Conclusion

Abstract

We have opened this work asking the question: “Which mechanisms, if any, are likely to be observed when human subjects have to solve a given implementation problem?”. The implementation problem we have investigated is that which is faced by a ring of bidders who participate in a first-price auction. In 92% of all rounds, players agreed on some collusive mechanism and implemented it. The mechanisms used by human players are very simple. Playing according to the most frequently used mechanism, they announced their values. In eleven auctions, players did not care about the announcing order; in one auction, they used a random mechanism to choose in which order to announce; in one auction, they specified the sequence of announcements so that Player i (i=1,2,3) once announced as first one, once as second one and so on. The player who made the highest announcement bid the reserve price and splitted equally the difference between his announcement minus the reserve price among the other two players. This mechanism is not incentive-compatible but subjects, in most of the rounds, announced their true values. Because of this, experimental subjects reached the optimal allocation in most of the cases.