Endogenous entry and self-selection in private value auctions: An experimental study
AbstractThis paper presents the results of an experimental study of endogenous entry in first-price independent private value auctions. N potential bidders simultaneously decide whether to participate in an auction or receive a known outside option. In the second stage, entrants submit bids after learning their own private values and the number of entrants. An equilibrium model of heterogeneous risk averse bidders implies a self-selection effect, where bidding in the auction is lower with endogenous entry because only less risk averse bidders enter. This effect is confirmed by the experiment. We also observe excessive entry relative to the theoretical model.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Economic Behavior & Organization.
Volume (Year): 66 (2008)
Issue (Month): 3-4 (June)
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Web page: http://www.elsevier.com/locate/jebo
Other versions of this item:
- Palfrey, Thomas R. & Pevnitskaya, Svetlana, 2003. "Endogenous Entry and Self-selection in Private Value Auctions: An Experimental Study," Working Papers 1172, California Institute of Technology, Division of the Humanities and Social Sciences.
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