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.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by Elsevier in its journal Journal of Economic Behavior & Organization.
Volume (Year): 66 (2008)
Issue (Month): 3-4 (June)
Contact details of provider:
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.
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Palfrey, Thomas R. & Goeree, Jacob & Holt, Charles, 2000.
"Quantal Response Equilibrium and Overbidding in Private-value Auctions,"
1073, California Institute of Technology, Division of the Humanities and Social Sciences.
- Goeree, Jacob K. & Holt, Charles A. & Palfrey, Thomas R., 2002. "Quantal Response Equilibrium and Overbidding in Private-Value Auctions," Journal of Economic Theory, Elsevier, vol. 104(1), pages 247-272, May.
- Jacob K. Goeree & Charles A. Holt & Thomas R. Palfrey, 2000. "Quantal Response Equilibrium and Overbidding in Private-Value Auctions," Virginia Economics Online Papers 345, University of Virginia, Department of Economics.
- Cox, James C & Smith, Vernon L & Walker, James M, 1988. " Theory and Individual Behavior of First-Price Auctions," Journal of Risk and Uncertainty, Springer, vol. 1(1), pages 61-99, March.
- Thomas Palfrey, 2002. "Quantal Response Equilibrium and Overbidding in Private Value Auctions," Theory workshop papers 357966000000000089, UCLA Department of Economics.
- Morgan John & Steiglitz Ken & Reis George, 2003. "The Spite Motive and Equilibrium Behavior in Auctions," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 2(1), pages 1-27, April.
- James Cox & Sam Dinkin & James Swarthout, 2001. "Endogenous Entry and Exit in Common Value Auctions," Experimental Economics, Springer, vol. 4(2), pages 163-181, October.
- Svetlana Pevnitskaya, 2003. "Endogenous Entry in First-Price Private Value Auctions: the Self-Selection Effect," Working Papers 03-03, Ohio State University, Department of Economics.
- Kirchkamp, Oliver & Poen, Eva & Reiß, J. Philipp, 2004. "Bidding with Outside Options," Sonderforschungsbereich 504 Publications 04-21, Sonderforschungsbereich 504, Universität Mannheim & Sonderforschungsbereich 504, University of Mannheim.
- Levin, Dan & Smith, James L, 1994. "Equilibrium in Auctions with Entry," American Economic Review, American Economic Association, vol. 84(3), pages 585-99, June.
- Fey, Mark & McKelvey, Richard D & Palfrey, Thomas R, 1996. "An Experimental Study of Constant-Sum Centipede Games," International Journal of Game Theory, Springer, vol. 25(3), pages 269-87.
- 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.
- Ivanova-Stenzel, Radosveta & Salmon, Timothy C., 2011. "The high/low divide: Self-selection by values in auction choice," Games and Economic Behavior, Elsevier, vol. 73(1), pages 200-214, September.
- Radosveta Ivanova-Stenzel & Timothy Salmon, 2009. "The High/Low Divide: Self-Selection by Values in Auction Choice," Working Papers wp2009_06_02, Department of Economics, Florida State University.
- Glenn Dutcher, E., 2012. "The effects of telecommuting on productivity: An experimental examination. The role of dull and creative tasks," Journal of Economic Behavior & Organization, Elsevier, vol. 84(1), pages 355-363.
- Sheng, Li, 2010. "Competing or cooperating to host mega events: A simple model," Economic Modelling, Elsevier, vol. 27(1), pages 375-379, January.
- Harrison, Glenn W. & Lau, Morten I. & Elisabet Rutström, E., 2009. "Risk attitudes, randomization to treatment, and self-selection into experiments," Journal of Economic Behavior & Organization, Elsevier, vol. 70(3), pages 498-507, June.
- R. Isaac & Svetlana Pevnitskaya & Timothy Salmon, 2010. "Do preferences for charitable giving help auctioneers?," Experimental Economics, Springer, vol. 13(1), pages 14-44, March.
- David Reiley, 2004. "Experimental evidence on the endogenous entry of bidders in internet auctions," Framed Field Experiments 00196, The Field Experiments Website.
- Mark Isaac & Svetlana Pevnitskaya & Kurt S. Schnier, 2012.
"Individual Behavior And Bidding Heterogeneity In Sealed Bid Auctions Where The Number Of Bidders Is Unknown,"
Western Economic Association International, vol. 50(2), pages 516-533, 04.
- R. Mark Isaac & Svetlana Pevnitskaya & Kurt Schnier, 2008. "Individual Behaavior and Bidding Heterogeneity in Sealed Bid Auctions Where the Number of Bidders is Unknown," Working Papers wp2008_07_02, Department of Economics, Florida State University.
- Michalis Drouvelis & Julian C. Jamison, 2012. "Selecting public goods institutions: who likes to punish and reward?," Working Papers 12-5, Federal Reserve Bank of Boston.
- Ertaç, Seda & Hortaçsu, Ali & Roberts, James W., 2011. "Entry into auctions: An experimental analysis," International Journal of Industrial Organization, Elsevier, vol. 29(2), pages 168-178, March.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).
If references are entirely missing, you can add them using this form.