Valuation structure in first-price and least-revenue auctions: An experimental investigation

Diego Aycinena, Rimvydas Baltaduonis, Lucas Rentschler

Resultado de la investigación: Contribución a RevistaArtículo

1 Cita (Scopus)

Resumen

In many auctions the valuation structure involves both private and common value elements. Existing experimental evidence (e.g. Goeree and Offerman in Am. Econ. Rev. 92(3):625–643, 2002) demonstrates that first-price auctions with this valuation structure tend to be inefficient, and inexperienced subjects tend to bid above the break-even bidding threshold. In this paper, we compare first-price auctions with an alternative auction mechanism: the least-revenue auction. This auction mechanism shifts the risk regarding the common value of the good to the auctioneer. Such a shift is desirable when ex post negative payoffs for the winning bidder results in unfulfilled contracts, as is often the case in infrastructure concessions contracts. We directly compare these two auction formats within two valuation structures: (1) pure common value and (2) common value with a private cost. We find that, relative to first-price auctions, bidding above the break-even bidding threshold is significantly less prevalent in least-revenue auctions regardless of valuation structure. As a result, revenue in first-price auctions is higher than in least-revenue auctions, contrary to theory. Further, when there are private and common value components, least-revenue auctions are significantly more efficient than first-price auctions.
Idioma originalEnglish (US)
Páginas (desde-hasta)100-128
Número de páginas29
PublicaciónExperimental Economics
Volumen17
N.º1
DOI
EstadoPublished - 2014

Huella dactilar

Auctions
Revenue
First-price auction
Common values
Bidding
Private values
Bid
Concession contracts
Costs

Citar esto

Aycinena, Diego ; Baltaduonis, Rimvydas ; Rentschler, Lucas. / Valuation structure in first-price and least-revenue auctions: An experimental investigation. En: Experimental Economics. 2014 ; Vol. 17, N.º 1. pp. 100-128.
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Valuation structure in first-price and least-revenue auctions: An experimental investigation. / Aycinena, Diego; Baltaduonis, Rimvydas; Rentschler, Lucas.

En: Experimental Economics, Vol. 17, N.º 1, 2014, p. 100-128.

Resultado de la investigación: Contribución a RevistaArtículo

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