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Outside options: Another reason to choose the first-price auction

Oliver Kirchkamp (), Eva Poen () and J. Philipp Rei
Authors registered in the RePEc Author Service: J. Philipp Reiss

European Economic Review, 2009, vol. 53, issue 2, 153-169

Abstract: In this paper we study equilibrium and experimental bidding behaviour in first-price and second-price auctions with outside options. We find that bidders do respond to outside options and to variations of common knowledge about competitors' outside options. However, overbidding in first-price auctions is significantly higher with outside options than without. First-price auctions yield more revenue than second-price auctions. This revenue-premium is significantly higher with outside options. In second-price auctions the introduction of outside options has only a small effect.

Keywords: Auction; Outside; options; Experiments; Revenue-premium; First-price; auction; Second-price; auction; Overbidding; Strategy; method (search for similar items in EconPapers)
Date: 2009
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