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The High/Low Divide: Self- Selection by Values in Auction Choice

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  • Ivanova-Stenzel, Radosveta
  • Salmon, Timothy C.

Abstract

Most prior theoretical and experimental work involving auction choice has assumed bidders only find out their value after making a choice of which autcion to enter. In this paper we examine whether or not subjects knowing their value prior to making an auction choice impacts their choice decision and/or the outcome of the auctions. The results show a strong impact. Subjects with low values choose the first price sealed bid auction more often while subjects with high values choose the ascending auction more often. The average numbers of bidders in both formats ended up being on average the same, but due to the self-selection bias the ascending auction raised as much revenue on average as the first sealed bid auction. The two formats also generate efficiency levels that are roughly equivalent though the earnings of bidders are higher in the ascending auction.

Suggested Citation

  • Ivanova-Stenzel, Radosveta & Salmon, Timothy C., 2010. "The High/Low Divide: Self- Selection by Values in Auction Choice," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 295, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
    • Handle: RePEc:trf:wpaper:295
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    References listed on IDEAS

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    1. Ivanova-Stenzel, Radosveta & Salmon, Timothy C., 2008. "Revenue equivalence revisited," Games and Economic Behavior, Elsevier, vol. 64(1), pages 171-192, September.
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    Cited by:

    1. Giebe, Thomas, 2014. "Innovation contests with entry auction," Journal of Mathematical Economics, Elsevier, vol. 55(C), pages 165-176.
    2. J.M.J. Delnoij & K.J.M. De Jaegher, 2016. "Competing first-price and second-price auctions," Working Papers 16-07, Utrecht School of Economics.
    3. Niklas Klarnskou & Philippos Louis & Wouter Passtoors, 2024. "Feedback and Competition in Procurement e-Auctions," University of Cyprus Working Papers in Economics 04-2024, University of Cyprus Department of Economics.
    4. J.M.J. Delnoij & K.J.M. De Jaegher & S. Rosenkranz, 2014. "Understanding preferences for ascending auctions, Buy-It-Now auctions and fixed prices," Working Papers 14-02, Utrecht School of Economics.
    5. Diego Aycinena & Hernán Bejarano & Lucas Rentschler, 2018. "Informed entry in auctions," International Journal of Game Theory, Springer;Game Theory Society, vol. 47(1), pages 175-205, March.
    6. Diego Aycinena & Lucas Rentschler, 2018. "Auctions with endogenous participation and an uncertain number of bidders: experimental evidence," Experimental Economics, Springer;Economic Science Association, vol. 21(4), pages 924-949, December.

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    More about this item

    Keywords

    bidder preferences; private values; sealed bid auctions; ascending auctions; endogenous entry;
    All these keywords.

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions

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