Get 20M+ Full-Text Papers For Less Than $1.50/day. Start a 14-Day Trial for You or Your Team.

Learn More →

Not knowing the competition: evidence and implications for auction design

Not knowing the competition: evidence and implications for auction design In a government auction program where first‐price auctions generate significantly higher revenue than English auctions, I document evidence that bidders are uncertain about the number of auction entrants. Motivated by additional data evidence, I estimate a structural model of auctions in which rivals' participation is stochastic, allowing for bidders' risk aversion and asymmetry. Counterfactual simulations reveal that bidders' uncertainty about the number of entrants, combined with risk aversion, substantially softens the revenue impact of low competition in first‐price auctions. This explains the observed revenue patterns and uncovers an empirically important reason for sellers to favor first‐price auctions over English auctions. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The Rand Journal of Economics Wiley

Not knowing the competition: evidence and implications for auction design

The Rand Journal of Economics , Volume 51 (3) – Sep 1, 2020

Loading next page...
 
/lp/wiley/not-knowing-the-competition-evidence-and-implications-for-auction-bgHbItiyt8

References (39)

Publisher
Wiley
Copyright
© 2020 The RAND Corporation
ISSN
0741-6261
eISSN
1756-2171
DOI
10.1111/1756-2171.12342
Publisher site
See Article on Publisher Site

Abstract

In a government auction program where first‐price auctions generate significantly higher revenue than English auctions, I document evidence that bidders are uncertain about the number of auction entrants. Motivated by additional data evidence, I estimate a structural model of auctions in which rivals' participation is stochastic, allowing for bidders' risk aversion and asymmetry. Counterfactual simulations reveal that bidders' uncertainty about the number of entrants, combined with risk aversion, substantially softens the revenue impact of low competition in first‐price auctions. This explains the observed revenue patterns and uncovers an empirically important reason for sellers to favor first‐price auctions over English auctions.

Journal

The Rand Journal of EconomicsWiley

Published: Sep 1, 2020

There are no references for this article.