Selling shares to budget-constrained bidders: an experimental study of the proportional auction

Jinsoo Bae and John Kagel
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Jinsoo Bae: Korea Institute of Public Finance

Journal of the Economic Science Association, 2022, vol. 8, issue 1, No 4, 45-55

Abstract: Abstract We explore the efficiency and revenue of proportional auctions (PA) compared to first price auction (FPA) for budget-constrained bidders. PA auctions have been used in privatization of Russian assets and in cryptocurrency sales, as they can achieve higher efficiency and revenue than FPAs when bidders face severe financial constraints. The experimental results support this in that under a tight budget constraint PA achieved higher revenue and efficiency than FPA, with these results reversed under a looser budget constraint. Detailed patterns of bidding are compared to the theoretical predictions for both PA and FPA.

Keywords: Budget-constrained bidders; Proportional auction; First price auction (search for similar items in EconPapers)
JEL-codes: D02 D44 (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1007/s40881-022-00119-x

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