NO.1401

Car License Auction: Theory and Experimental Evidence

Lijia Tan and Lijia Wei

Abstract
In Singapore and many Chinese cities, tens of thousands of people participate in car license auctions each month. In a car license auction, many car licenses are sold but each participant can only bid for one license. We examine the theoretical properties of three auction formats: Shanghai auction, Guangzhou auction, and Singapore auction. Our main results are that (1) No equilibrium of the Shanghai auction can guarantee an efficient allocation, (2) the Singapore auction allocates objects efficiently if and only if a unique market clearing price does not exist, and (3) the Guangzhou auction is efficient if bidders are symmetric. The experimental evidence confirms our theoretical prediction. Our experiment also shows that the learning effects over time are quite different among these auction formats.

Creation Date
9/2/2014

Revision Date
9/2/2014

Classification-JEL
C92; D02; D04; D44

Keywords
Auction; Car License; Laboratory Experiment

File Attachments
Full Text (2014)