Bidder Preferences among Auction Institutions

doi:10.1093/ei/cbh056

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Wiley InterScience

Economic Inquiry

Volume 42 Issue 2, Pages 223 - 236

Published Online: 26 Mar 2007

A Journal of the Western Economic Association International

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Bidder Preferences among Auction Institutions

Radosveta Ivanova-Stenzel ¹ Timothy C. Salmon* ²

¹ Ivanova-Stenzel: Research Assistant, Humboldt-University of Berlin, Department of Economics, Spandauer Str. 1, D-10178 Berlin, Germany. Phone 49–30–2093–5733, Fax 49–30–2093–5619, E-mail ivanova@wiwi.hu-berlin.de ² Salmon: Assistant Professor of Economics, Department of Economics, Florida State University, Tallahassee, FL, 32306–2180. Phone 1–850–644–7207, Fax 1–850–644–4535, E-mail tsalmon@garnet.acns.fsu.edu

*We thank various participants in seminars at Florida State University, University College London, Max Planck Institute for Research into Economic Systems, and ESA Meeting 2002 for comments and advice. We thank Mark Isaac, Sabine Kröger, and Frank Heiland in particular for many helpful conversations and suggestions. Financial Support from the Deutsche Forschungsgemeinschaft, SFB 373 ("Quantifikation und Simulation ökonomischer Prozesse"), Humboldt-University of Berlin, is gratefully acknowledged. Complete sets of instructions for the experiments in this article are available on request to the authors.

ABSTRACT

This study examines bidder preferences between alternative auction institutions. We seek to characterize experimentally the degree to which bidders prefer an ascending auction to a sealed bid auction. We find very strong ceteris paribus preferences for the ascending institution with bidders choosing it overwhelmingly often when entry prices for the two auctions are the same. When the entry prices of the two auctions differ, many subjects can be shown to be willing to pay more to enter the ascending auction than is explainable by their risk attitudes when accounting for their expectations about the risk preferences of their opponents. (JEL C91, D44)

DIGITAL OBJECT IDENTIFIER (DOI)

10.1093/ei/cbh056 About DOI