Bidding up, buying out and cooling-off: an examination of auctions with withdrawal rights

John Asker

Economic Theory, 2000, vol. 16, issue 3, 585-611

Abstract: This paper considers a model in which bidders in an auction are faced with uncertainty as to their final valuation of the auctioned object. This uncertainty is resolved after the auction has taken place. It is argued that the inclusion of a cooling-off right raises the expected revenue to the seller when bidders face a risk of the object being a strict `bad', in that owning the object incurs negative utility to the winner of the auction. The model is then tested in a laboratory setting. The evidence from this experiment supports the predictions of the theory.

Keywords: Auctions; Withdrawal rights; Auction experiments; Cooling-off rights. (search for similar items in EconPapers)
JEL-codes: C92 D44 K11 (search for similar items in EconPapers)
Date: 2000-08-11
Note: Received: April 23, 1999; revised version: March 20, 2000
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Citations: View citations in EconPapers (10)

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