Outside options: another reason to choose the first-price auction
Kirchkamp, Oliver; Poen, Eva; Reiß, J. Philipp
Date: 26 March 2008
Article
Journal
European Economic Review
Publisher
Elsevier
Publisher DOI
Abstract
In this paper we study equilibrium and experimental bidding behaviour in first-price and second-price auctions with outside options.
We find that bidders do respond to outside options and to variations of common knowledge about competitors’ outside options. However, overbidding in first-price auctions is significantly higher with ...
In this paper we study equilibrium and experimental bidding behaviour in first-price and second-price auctions with outside options.
We find that bidders do respond to outside options and to variations of common knowledge about competitors’ outside options. However, overbidding in first-price auctions is significantly higher with outside options than without. First-price auctions yield more revenue than second-price auctions. This revenue-premium is significantly higher with outside options. In second-price auctions the introduction of outside options has only a small effect.
Economics
Faculty of Environment, Science and Economy
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