Bidders' choice auctions: Raising revenues through the right to choose

Jacob Goeree, Charles Plott and John Wooders

No 1181, Working Papers from California Institute of Technology, Division of the Humanities and Social Sciences

Abstract: Sales of multiple real-estate properties are ften conducted via a sequence of ascending auctions, giving the winner at each stage the right to choose one of the available lots. We show that when bidders are risk averse, such "bidders' choice" auctions raise more revenues than standard simultaneous or sequential ascending auctions. We also report the results of laboratory experiments to investigate the effectiveness of bidders' choice auctions vis-a-vis the simultaneous ascending auction. The revenue-superiority of the bidders' choice auction is corroborated by the experimental data. Finally, we compare observed bidding behavior in the experiments with theoretically predicted bids to estimate a common risk aversion parameter from the data.

Keywords: auctions; right to choose; risk aversion (search for similar items in EconPapers)
Pages: 13 pages
Date: 2003-08
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Journal Article: Bidders' Choice Auctions: Raising Revenues Through the Right to Choose (2004)
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