The net effect of advice on strategy-proof mechanisms : An experiment for the Vickrey auction

We conducted laboratory experiments for the multi-unit Vickrey auction with and without advice to subjects on strategy-proofness. The rate of truth-telling among the subjects without advice was 20%, whereas the rate increased to 47% among those who received advice. By conducting similar experiments for the pay-your-bid auction, which is not strategy-proof, we confirm that the increase in truth-telling owes significantly to the net advice effect, i.e., the effect beyond the so-called experimenter demand effect. Moreover, providing advice improves efficiency in the Vickrey auction, particularly in the early periods, when subjects are less experienced. It is well known that subjects tend to overbid in Vickrey auction experiments. Our results indicate the possibility that providing a piece of simple advice decreases such overbidding by promoting a better understanding of the strategy-proofness property in the Vickrey auction. Strategy-proof mechanisms are sometimes criticized because players often fail to find the benefit in telling the truth; however, our observations show that introducing advice on the property of strategy-proofness helps them behave “correctly.