A random nth-price auction

Second-price auctions are designed to induce people to reveal their private preferences for a good. Laboratory evidence suggests that while these auct ions do a reasonable job on aggregate, they fall short at the individual le vel, especially for bidders who are off-margin of the market-clearing price . Herein we introduce and explore whether a random nth-price auction can en gage. all bidders to bid sincerely. Our results first show that the random nth-price auction can induce sincere bidding in theory and practice. We the n compare the random nth-price to the second-price auction. We find that th e second-price auction works better on-margin, and the random nth-price auc tion works better off-margin. (C) 2001 Elsevier Science B.V. All rights res erved.