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Bidders' choice auctions: Raising revenues through the right to choose

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Author Info
Goeree, Jacob
Plott, Charles
Wooders, John

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Abstract

Sales of multiple real-estate properties are ften conducted via a sequence of ascending auctions, giving the winner at each stage the right to choose one of the available lots. We show that when bidders are risk averse, such "bidders' choice" auctions raise more revenues than standard simultaneous or sequential ascending auctions. We also report the results of laboratory experiments to investigate the effectiveness of bidders' choice auctions vis-a-vis the simultaneous ascending auction. The revenue-superiority of the bidders' choice auction is corroborated by the experimental data. Finally, we compare observed bidding behavior in the experiments with theoretically predicted bids to estimate a common risk aversion parameter from the data.

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Publisher Info
Paper provided by California Institute of Technology, Division of the Humanities and Social Sciences in its series Working Papers with number 1181.

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Length: 13 pages
Date of creation: Aug 2003
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Publication status: Published:
Handle: RePEc:clt:sswopa:1181

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Postal: Working Paper Assistant, Division of the Humanities and Social Sciences, 228-77, Caltech, Pasadena CA 91125
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Related research
Keywords: auctions; right to choose; risk aversion;

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This paper has been announced in the following NEP Reports: References listed on IDEAS
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  1. Roberto Burguet, . "Right To Choose In Oral Auctions," UFAE and IAE Working Papers 439.99, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC). [Downloadable!]
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  2. Menezes, Flavio M & Monteiro, Paulo Klinger, 1998. "Simultaneous Pooled Auctions," The Journal of Real Estate Finance and Economics, Springer, vol. 17(3), pages 219-32, November. [Downloadable!] (restricted)
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  3. Ashenfelter, Orley & Genesove, David, 1992. "Testing for Price Anomalies in Real-Estate Auctions," American Economic Review, American Economic Association, vol. 82(2), pages 501-05, May. [Downloadable!] (restricted)
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  4. Plott, Charles R. & Salmon, Timothy, 2002. "The Simultaneous, Ascending Auction: Dynamics of Price Adjustment in Experiments and in the U.K. 3G Spectrum Auction," Working Papers 1155, California Institute of Technology, Division of the Humanities and Social Sciences. [Downloadable!]
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  5. Roberto Burguet, 2005. "The condominium problem; auctions for substitutes," Review of Economic Design, Springer, vol. 9(2), pages 73-90, 04. [Downloadable!] (restricted)
  6. Gale Ian L. & Hausch Donald B., 1994. "Bottom-Fishing and Declining Prices in Sequential Auctions," Games and Economic Behavior, Elsevier, vol. 7(3), pages 318-331, November. [Downloadable!] (restricted)
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Cited by:
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  1. Timothy Salmon & Bart Wilson, 2008. "Second chance offers versus sequential auctions: theory and behavior," Economic Theory, Springer, vol. 34(1), pages 47-67, January. [Downloadable!] (restricted)
  2. Maarten C.W. Janssen & Vladimir A. Karamychev & Emiel Maasland, 2008. "Simultaneous Pooled Auctions with Multiple Bids and Preference Lists," Tinbergen Institute Discussion Papers 08-034/1, Tinbergen Institute. [Downloadable!]
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