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Auctions with endogenous participation and an uncertain number of bidders: experimental evidence
Published online by Cambridge University Press: 14 March 2025
Abstract
Attracting bidders to an auction is a key factor in determining revenue. We experimentally investigate entry and bidding behavior in first-price and English clock auctions to determine the revenue implications of entry. Potential bidders observe their value and then decide whether or not to incur a cost to enter. We also vary whether or not bidders are informed regarding the number of entrants prior to placing their bids. Revenue equivalence is predicted in all four environments. We find that, regardless of whether or not bidders are informed, first-price auctions generate more revenue than English clock auctions. Within a given auction format, the effect of informing bidders differs. In first-price auctions, revenue is higher when bidders are informed, while the opposite is true in English clock auctions. The optimal choice for an auction designer who wishes to maximize revenue is a first-price auction with uninformed bidders.
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- Copyright © 2017 Economic Science Association
Footnotes
Electronic supplementary material The online version of this article (https://doi.org/10.1007/s10683-017-9558-8) contains supplementary material, which is available to authorized users.