Bidding up, buying out and cooling-off: an examination of auctions with withdrawal rights
AbstractThis paper considers a model in which bidders in an auction are faced with uncertainty as to their final valuation of the auctioned object. This uncertainty is resolved after the auction has taken place. It is argued that the inclusion of a cooling-off right raises the expected revenue to the seller when bidders face a risk of the object being a strict `bad', in that owning the object incurs negative utility to the winner of the auction. The model is then tested in a laboratory setting. The evidence from this experiment supports the predictions of the theory.
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Bibliographic InfoArticle provided by Springer in its journal Economic Theory.
Volume (Year): 16 (2000)
Issue (Month): 3 ()
Note: Received: April 23, 1999; revised version: March 20, 2000
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Find related papers by JEL classification:
- C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
- D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
- K11 - Law and Economics - - Basic Areas of Law - - - Property Law
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- Eric Rasmusen, 2007.
"Getting Carried Away in Auctions as Imperfect Value Discovery,"
2007-05, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.
- Eric Rasmusen, 2004. "Getting Carried Away in Auctions as Imperfect Value Discovery," Industrial Organization 0409001, EconWPA.
- Peter Eso & Lucy White, 2001.
"Precautionary Bidding in Auctions,"
1331, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Ottorino Chillemi & Claudio Mezzetti, 2014. "Optimal procurement mechanisms: bidding on price and damages for breach," Economic Theory, Springer, vol. 55(2), pages 335-355, February.
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