The high/low divide: Self-selection by values in auction choice

Most prior theoretical and experimental work involving auction choice has assumed bidders find out their value after making a choice of which auction to enter. We examine whether or not bidders knowing their value prior to making a choice of which among multiple alternative auction formats to enter...

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Bibliographic Details
Published in:Games and economic behavior 2011-09, Vol.73 (1), p.200-214
Main Authors: Ivanova-Stenzel, Radosveta, Salmon, Timothy C.
Format: Article
Language:English
Subjects:
Ascending auctions
Auction theory
Auctions
Bidder preferences
Bidder preferences Private values Sealed bid auctions Ascending auctions Endogenous entry
Bidders
Bidding
Bids
Economic theory
Endogenous entry
Preferences
Price formation
Private values
Sealed bid auctions
Studies
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Summary:Most prior theoretical and experimental work involving auction choice has assumed bidders find out their value after making a choice of which auction to enter. We examine whether or not bidders knowing their value prior to making a choice of which among multiple alternative auction formats to enter impacts their choice decision and/or the outcome of the auctions. The results show a strong impact on auction choice. Subjects with low values choose the first price sealed bid auction more often while subjects with high values choose the ascending auction more often. The number of bidders in each auction, revenue, efficiency and average bidder surplus all end up equalized. ► Examines endogenous entry in auctions when bidders know value prior to entry. ► Low value bidders select into first price sealed bid auction. ► High value bidders select into ascending auction. ► Revenue between formats not significantly different. ► Auction choice behavior roughly consistent with best response to behavior of others.
ISSN:0899-8256
1090-2473
DOI:10.1016/j.geb.2010.12.011