Entry and Bidding Behavior in Surplus-Extracting Auctions: An Experiment

Takeshi Nishimura and Nobuyuki Hanaki

ISER Discussion Paper from Institute of Social and Economic Research, The University of Osaka

Abstract: We provide experimental evidence on entry and bidding behavior in surplusextracting auctions built on the second-price format. In addition to the simple second-price auction, we consider full- and partial-surplus-extracting auctions. The latter leaves more surplus to bidders under full entry than the former, while preserving the same set of undominated strategies: value bidding and opting out. In contrast to the second-price auction, both auctions exhibit lower entry and overbidding among entrants. Our findings highlight the interplay between entry and bidding behavior, shedding light on the trade-off between surplus extraction and strategic simplicity in auction design with voluntary participation.

Date: 2024-11, Revised 2026-09
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