Dr. Rimvydas Baltaduonis publishes article in “Experimental Economics”

Dr. Baltaduonis co-authored a publication with Dr. Aycinena (Universidad Francsico Marroquín) and Dr. Rentschler (Universidad Francsico Marroquín) in “Experimental Economics” titled “Valuation structure in first-prize and least-revenue auctions: an experimental investigation.”

The published experiment was one of the first experiments conducted at Centro Vernon Smith de Económia Experimental at Universidad Francsico Marroquín in Guatemala.

“Most of my research is motivated by very practical challenges in organizing economic activity.  I can test new and imagined approaches, which have not even been tried yet in the field, and then translate the insights coming from a controlled small-scale environment of the lab into real life applications,” Baltaduonis said.

The study investigates the performance of two types of auctions: a first-price auction and a least-revenue auction.  The findings of the study show that the latter is significantly more efficient and reduces the likelihood of winner’s curse, which is a phenomenon when the winner overpays or is “cursed.”

Winner’s curse may occur when the actual value of the asset is still uncertain at the time of biding.  Winner’s curse often results in unfulfilled contracts and may even cause bankruptcy for the “winner”, forcing many auctioneers to renegotiate initial contracts. 

Over 50% of concession contracts for transportation infrastructure are renegotiated.  With this high renegotiation rate, there has been a push for research to find a better and more transparent way to allocate these contracts.  Baltaduonis and his co-authors’ suggested least-revenue auction seems to solve the problem.    

“The laboratory evidence that our proposed least-revenue auction basically eliminates winner’s curse, which is rampant in a first-price auction, tops my list as being the experiment’s most interesting finding,” Baltaduonis said. 

Read the full publication