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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

Diego Aycinena  and
Lucas Rentschler Open the ORCID record for Lucas Rentschler [Opens in a new window]
Diego Aycinena
Affiliation:
Facultad de Economía, Universidad del Rodario, Calle 12C No. 6-25 Bogotá, D.C., Colombia
Lucas Rentschler*
Affiliation:
Department of Economics and Finance, Utah State University, 3500 Old Main Hill, Logan, UT 84322, USA
*
lucas.rentschler@usu.edu
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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.

Keywords

AuctionsRevenue equivalenceEndogenous entryExperimentsBiddingD44D80
Type
Original Paper
Information
Experimental Economics , Volume 21 , Issue 4 , December 2018 , pp. 924 - 949
Copyright
Copyright © 2017 Economic Science Association

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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.

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