English, Article, Journal or magazine article edition: Outside options: Another reason to choose the first-price auction Oliver Kirchkamp; Eva Poen; J. Philipp Reiß

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Physical Description
  • preprint
Language
  • English

Edition details

Title
  • Outside options: Another reason to choose the first-price auction
Author
  • Oliver Kirchkamp
  • Eva Poen
  • J. Philipp Reiß
Physical Description
  • preprint
Notes
  • In this paper we derive equilibrium bidding functions for first-price and second-price auctions with private values when bidders have outside options. We then study bidding behaviour with the help of experiments. We find that bidders respond to outside options and to variations of common knowledge about competitors’ outside options, though bidders in first-price auctions show more overbidding with outside options than without. In second-price auctions overbidding is not affected by outside options. As expected first-price auctions yield more revenue than second-price auctions. This revenue-premium is higher in the presence of outside options.
  • Auction, Experiment, Outside Option
  • RePEc:san:crieff:0605
  • 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.
  • Experiments, Auction, Expectations
  • RePEc:jrp:jrpwrp:2008-022
Language
  • English
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