The Sealed Bid Mechanism: An Experimental Study

Eight experiments were performed to test the properties of the sealed bid mechanism for bargaining under incomplete information. This mechanism has been shown to have a large number of equilibria, of widely differing levels of efficiency. On the whole, experimental subjects were able to capture a large portion of the gains from trade. In addition, the behavior of the subjects was qualitatively consistent with one particular equilibrium of the mechanism, namely the one with linear bidding strategies.