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Revenue equivalence revisited

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  • Ivanova-Stenzel, Radosveta
  • Salmon, Timothy C.

Abstract

The conventional wisdom in the auction design literature is that first price sealed bid auctions tend to make more money while ascending auctions tend to be more efficient. We re-examine these issues in an environment in which bidders are allowed to endogenously choose in which auction format to participate. Our findings are that more bidders choose to enter the ascending auction than the first price sealed bid auction and this extra entry is enough to make up the revenue difference between the formats. Consequently, we find that both formats raise approximately the same amount of revenue. They also generate efficiency levels and bidder earnings that are roughly equivalent across mechanisms though the earnings in the ascending might be slightly higher.

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Bibliographic Info

Article provided by Elsevier in its journal Games and Economic Behavior.

Volume (Year): 64 (2008)
Issue (Month): 1 (September)
Pages: 171-192

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Handle: RePEc:eee:gamebe:v:64:y:2008:i:1:p:171-192

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Web page: http://www.elsevier.com/locate/inca/622836

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Keywords: Bidder preferences Private values Sealed bid auctions Ascending auctions Endogenous entry;

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References

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Cited by:
  1. Guillaume R. Fréchette, 2006. "Session Effects in the Laboratory," CIRANO Working Papers 2006s-21, CIRANO.
  2. Ivanova-Stenzel, Radosveta & Salmon, Timothy C., 2010. "The High/Low Divide: Self- Selection by Values in Auction Choice," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 295, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
  3. Ivanova-Stenzel, Radosveta & Salmon, Timothy C., 2006. "Anomalies in Auction Choice Behavior," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 174, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.

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