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Bidders' Choice Auctions: Raising Revenues Through the Right to Choose

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  • Jacob K. Goeree

    (CREED and University of Amsterdam,)

  • Charles R. Plott

    (California Institute of Technology,)

  • John Wooders

    (University of Arizona,)

Abstract

Sales of multiple real-estate properties are often conducted via a sequence of ascending auctions, giving the winner at each stage the right to choose one of the available lots. We show that when bidders are risk averse, such "bidders' choice" auctions raise more revenues than standard simultaneous or sequential ascending auctions. We also report the results of laboratory experiments to investigate the effectiveness of bidders' choice auctions vis-a-vis the simultaneous ascending auction. The revenue-superiority of the bidders' choice auction is corroborated by the experimental data. Finally, we compare observed bidding behavior in the experiments with theoretically predicted bids to estimate a common risk aversion parameter from the data. (JEL: D44, C72) Copyright (c) 2004 The European Economic Association.

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Bibliographic Info

Article provided by MIT Press in its journal Journal of the European Economic Association.

Volume (Year): 2 (2004)
Issue (Month): 2-3 (04/05)
Pages: 504-515

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Handle: RePEc:tpr:jeurec:v:2:y:2004:i:2-3:p:504-515

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Cited by:
  1. Jonathan E. Alevy & Oscar Cristi & Oscar Melo, 2010. "Right-to-Choose Auctions: A Field Study of Water Markets in the Limari Valley of Chile," Working Papers 2010-04, University of Alaska Anchorage, Department of Economics.
  2. Salmon, Timothy C. & Iachini, Michael, 2007. "Continuous ascending vs. pooled multiple unit auctions," Games and Economic Behavior, Elsevier, vol. 61(1), pages 67-85, October.
  3. Eliaz, Kfir & Offerman, Theo & Schotter, Andrew, 2008. "Creating competition out of thin air: An experimental study of right-to-choose auctions," Games and Economic Behavior, Elsevier, vol. 62(2), pages 383-416, March.
  4. Maarten C.W. Janssen & Vladimir A. Karamychev & Emiel Maasland, 2008. "Simultaneous Pooled Auctions with Multiple Bids and Preference Lists," Tinbergen Institute Discussion Papers 08-034/1, Tinbergen Institute.
  5. Ronald M. Harstad, 2009. "Does a Seller Really Want Another Bidder?," Working Papers 0909, Department of Economics, University of Missouri.
  6. Maarten C.W. Janssen & Vladimir A. Karamychev & Emiel Maasland, 2008. "Simultaneous Pooled Auctions with Multiple Bids and Preference Lists," Tinbergen Institute Discussion Papers 08-034/1, Tinbergen Institute.
  7. Roberto Burguet, . "Right To Choose In Oral Auctions," UFAE and IAE Working Papers 439.99, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
  8. Timothy Salmon & Bart Wilson, 2008. "Second chance offers versus sequential auctions: theory and behavior," Economic Theory, Springer, vol. 34(1), pages 47-67, January.

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