Auctions with Positive Synergies: Experimental Evidence

YuenLeng Chow and Abdullah Yavas ()

MPRA Paper from University Library of Munich, Germany

Abstract: In a standard auction, bidders bid more aggressively when the number of bidders increases. However, Krishna and Rosenthal (1996, Games and Economic Behavior) show that when bidders have multiple-unit demand that generates positive synergies, bidders bid less aggressively as the number of bidders increases. The first objective of this paper is to offer experimental evidence on this seemingly counter-intuitive theoretical prediction. Following the model of Krishna and Rosenthal, we design a simultaneous second-price sealed-bid auction for two objects with two types of bidders: single-object and multiple-object demand bidders. Our results show that bidders bid less aggressively with increased competition. The second objective is to investigate the effect of offering global bidders the option of bidding for both objects as a package as well as submitting individual bids for each object. Controlling for bidders' valuations, we find that offering this option to global bidders increases allocative efficiency and sellers' revenue.

Keywords: Auction; Positive Synergies; Increased Competition; Package Bids (search for similar items in EconPapers)
JEL-codes: C91 D44 (search for similar items in EconPapers)
Date: 2008-12
New Economics Papers: this item is included in nep-com, nep-exp and nep-gth
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:12669

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