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Auctions with endogenous participation and an uncertain number of bidders: experimental evidence

Diego Aycinena and Lucas Rentschler ()
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Diego Aycinena: Universidad del Rodario
Lucas Rentschler: Utah State University

Experimental Economics, 2018, vol. 21, issue 4, 924-949

Abstract: Abstract Attracting bidders to an auction is a key factor in determining revenue. We experimentally investigate entry and bidding behavior in first-price and English clock auctions to determine the revenue implications of entry. Potential bidders observe their value and then decide whether or not to incur a cost to enter. We also vary whether or not bidders are informed regarding the number of entrants prior to placing their bids. Revenue equivalence is predicted in all four environments. We find that, regardless of whether or not bidders are informed, first-price auctions generate more revenue than English clock auctions. Within a given auction format, the effect of informing bidders differs. In first-price auctions, revenue is higher when bidders are informed, while the opposite is true in English clock auctions. The optimal choice for an auction designer who wishes to maximize revenue is a first-price auction with uninformed bidders.

Keywords: Auctions; Revenue equivalence; Endogenous entry; Experiments; Bidding; D44; D80 (search for similar items in EconPapers)
Date: 2018
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