Participation, selection and indicative bidding in auctions with costly entry

Changxia Ke, Greg Kubitz and Yang Liu

Papers from arXiv.org

Abstract: We study auctions with costly entry in which bidders have incomplete information about their affiliated private valuations prior to entry. We examine whether indicative bidding--a mechanism requiring non-binding preliminary bids before entry--can stimulate participation and improve entrant selection, and we compare its performance with unrestricted and capped entry in a controlled laboratory experiment. When entry costs are high, indicative bidding generates significantly more revenue, primarily by increasing participation beyond theoretical predictions. When entry costs are low, its predicted revenue advantage is attenuated by higher-than-predicted selection inefficiency.

Date: 2026-08
New Economics Papers: this item is included in nep-des and nep-exp
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