Valuation structure in first-price and least-revenue auctions: An experimental investigation

In many auctions the valuation structure involves both private and common value elements. Existing experimental evidence (e.g. Goeree and Offerman in Am. Econ. Rev. 92(3):625–643, 2002) demonstrates that first-price auctions with this valuation structure tend to be inefficient, and inexperienced sub...

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Autores:
Tipo de recurso:
Fecha de publicación:
2014
Institución:
Universidad del Rosario
Repositorio:
Repositorio EdocUR - U. Rosario
Idioma:
eng
OAI Identifier:
oai:repository.urosario.edu.co:10336/26391
Acceso en línea:
https://doi.org/10.1007/s10683-013-9359-7
https://repository.urosario.edu.co/handle/10336/26391
Palabra clave:
Auctions
Winner’s curse
Allocative efficiency
Bidding
Rights
License
Restringido (Acceso a grupos específicos)
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oai_identifier_str oai:repository.urosario.edu.co:10336/26391
network_acronym_str EDOCUR2
network_name_str Repositorio EdocUR - U. Rosario
repository_id_str
spelling 71597060069d60981-efa3-4ea2-8328-41f6f311fde33a1e0674-fc05-4513-b46b-b21a859020002020-08-06T16:21:33Z2020-08-06T16:21:33Z2014In many auctions the valuation structure involves both private and common value elements. Existing experimental evidence (e.g. Goeree and Offerman in Am. Econ. Rev. 92(3):625–643, 2002) demonstrates that first-price auctions with this valuation structure tend to be inefficient, and inexperienced subjects tend to bid above the break-even bidding threshold. In this paper, we compare first-price auctions with an alternative auction mechanism: the least-revenue auction. This auction mechanism shifts the risk regarding the common value of the good to the auctioneer. Such a shift is desirable when ex post negative payoffs for the winning bidder results in unfulfilled contracts, as is often the case in infrastructure concessions contracts. We directly compare these two auction formats within two valuation structures: (1) pure common value and (2) common value with a private cost. We find that, relative to first-price auctions, bidding above the break-even bidding threshold is significantly less prevalent in least-revenue auctions regardless of valuation structure. As a result, revenue in first-price auctions is higher than in least-revenue auctions, contrary to theory. Further, when there are private and common value components, least-revenue auctions are significantly more efficient than first-price auctions.application/pdfhttps://doi.org/10.1007/s10683-013-9359-7ISSN: 1386-4157EISSN: 1573-6938https://repository.urosario.edu.co/handle/10336/26391engSpringer Nature128No. 17100Experimental EconomicsExperimental Economics, ISSN:1386-4157;EISSN:1573-6938.No.17 (2014);PP.100-128https://link.springer.com/article/10.1007/s10683-013-9359-7Restringido (Acceso a grupos específicos)http://purl.org/coar/access_right/c_16ecExperimental Economicsinstname:Universidad del Rosarioreponame:Repositorio Institucional EdocURAuctionsWinner’s curseAllocative efficiencyBiddingValuation structure in first-price and least-revenue auctions: An experimental investigationEstructura de valoración en subastas de primer precio y de menores ingresos: una investigación experimentalarticleArtículohttp://purl.org/coar/version/c_970fb48d4fbd8a85http://purl.org/coar/resource_type/c_6501Aycinena Abascal, DiegoBaltaduonis,RimvydasRentschler,Lucas10336/26391oai:repository.urosario.edu.co:10336/263912021-08-17 06:09:07.503https://repository.urosario.edu.coRepositorio institucional EdocURedocur@urosario.edu.co
dc.title.spa.fl_str_mv Valuation structure in first-price and least-revenue auctions: An experimental investigation
dc.title.TranslatedTitle.spa.fl_str_mv Estructura de valoración en subastas de primer precio y de menores ingresos: una investigación experimental
title Valuation structure in first-price and least-revenue auctions: An experimental investigation
spellingShingle Valuation structure in first-price and least-revenue auctions: An experimental investigation
Auctions
Winner’s curse
Allocative efficiency
Bidding
title_short Valuation structure in first-price and least-revenue auctions: An experimental investigation
title_full Valuation structure in first-price and least-revenue auctions: An experimental investigation
title_fullStr Valuation structure in first-price and least-revenue auctions: An experimental investigation
title_full_unstemmed Valuation structure in first-price and least-revenue auctions: An experimental investigation
title_sort Valuation structure in first-price and least-revenue auctions: An experimental investigation
dc.subject.keyword.spa.fl_str_mv Auctions
Winner’s curse
Allocative efficiency
Bidding
topic Auctions
Winner’s curse
Allocative efficiency
Bidding
description In many auctions the valuation structure involves both private and common value elements. Existing experimental evidence (e.g. Goeree and Offerman in Am. Econ. Rev. 92(3):625–643, 2002) demonstrates that first-price auctions with this valuation structure tend to be inefficient, and inexperienced subjects tend to bid above the break-even bidding threshold. In this paper, we compare first-price auctions with an alternative auction mechanism: the least-revenue auction. This auction mechanism shifts the risk regarding the common value of the good to the auctioneer. Such a shift is desirable when ex post negative payoffs for the winning bidder results in unfulfilled contracts, as is often the case in infrastructure concessions contracts. We directly compare these two auction formats within two valuation structures: (1) pure common value and (2) common value with a private cost. We find that, relative to first-price auctions, bidding above the break-even bidding threshold is significantly less prevalent in least-revenue auctions regardless of valuation structure. As a result, revenue in first-price auctions is higher than in least-revenue auctions, contrary to theory. Further, when there are private and common value components, least-revenue auctions are significantly more efficient than first-price auctions.
publishDate 2014
dc.date.created.spa.fl_str_mv 2014
dc.date.accessioned.none.fl_str_mv 2020-08-06T16:21:33Z
dc.date.available.none.fl_str_mv 2020-08-06T16:21:33Z
dc.type.eng.fl_str_mv article
dc.type.coarversion.fl_str_mv http://purl.org/coar/version/c_970fb48d4fbd8a85
dc.type.coar.fl_str_mv http://purl.org/coar/resource_type/c_6501
dc.type.spa.spa.fl_str_mv Artículo
dc.identifier.doi.none.fl_str_mv https://doi.org/10.1007/s10683-013-9359-7
dc.identifier.issn.none.fl_str_mv ISSN: 1386-4157
EISSN: 1573-6938
dc.identifier.uri.none.fl_str_mv https://repository.urosario.edu.co/handle/10336/26391
url https://doi.org/10.1007/s10683-013-9359-7
https://repository.urosario.edu.co/handle/10336/26391
identifier_str_mv ISSN: 1386-4157
EISSN: 1573-6938
dc.language.iso.spa.fl_str_mv eng
language eng
dc.relation.citationEndPage.none.fl_str_mv 128
dc.relation.citationIssue.none.fl_str_mv No. 17
dc.relation.citationStartPage.none.fl_str_mv 100
dc.relation.citationTitle.none.fl_str_mv Experimental Economics
dc.relation.ispartof.spa.fl_str_mv Experimental Economics, ISSN:1386-4157;EISSN:1573-6938.No.17 (2014);PP.100-128
dc.relation.uri.spa.fl_str_mv https://link.springer.com/article/10.1007/s10683-013-9359-7
dc.rights.coar.fl_str_mv http://purl.org/coar/access_right/c_16ec
dc.rights.acceso.spa.fl_str_mv Restringido (Acceso a grupos específicos)
rights_invalid_str_mv Restringido (Acceso a grupos específicos)
http://purl.org/coar/access_right/c_16ec
dc.format.mimetype.none.fl_str_mv application/pdf
dc.publisher.spa.fl_str_mv Springer Nature
dc.source.spa.fl_str_mv Experimental Economics
institution Universidad del Rosario
dc.source.instname.none.fl_str_mv instname:Universidad del Rosario
dc.source.reponame.none.fl_str_mv reponame:Repositorio Institucional EdocUR
repository.name.fl_str_mv Repositorio institucional EdocUR
repository.mail.fl_str_mv edocur@urosario.edu.co
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