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Selling shares to budget-constrained bidders: an experimental study of the proportional auction

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  • Jinsoo Bae

    (Korea Institute of Public Finance)

  • John H. Kagel

    (Ohio State University)

Abstract

We explore the efficiency and revenue of proportional auctions (PA) compared to first price auction (FPA) for budget-constrained bidders. PA auctions have been used in privatization of Russian assets and in cryptocurrency sales, as they can achieve higher efficiency and revenue than FPAs when bidders face severe financial constraints. The experimental results support this in that under a tight budget constraint PA achieved higher revenue and efficiency than FPA, with these results reversed under a looser budget constraint. Detailed patterns of bidding are compared to the theoretical predictions for both PA and FPA.

Suggested Citation

  • Jinsoo Bae & John H. Kagel, 2022. "Selling shares to budget-constrained bidders: an experimental study of the proportional auction," Journal of the Economic Science Association, Springer;Economic Science Association, vol. 8(1), pages 45-55, December.
    • Handle: RePEc:spr:jesaex:v:8:y:2022:i:1:d:10.1007_s40881-022-00119-x
    DOI: 10.1007/s40881-022-00119-x
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    References listed on IDEAS

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    More about this item

    Keywords

    Budget-constrained bidders; Proportional auction; First price auction;
    All these keywords.

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D02 - Microeconomics - - General - - - Institutions: Design, Formation, Operations, and Impact

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