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Charity Auctions: A Field Experimental Investigation

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  • Carpenter, Jeffrey P.

    ()
    (Middlebury College)

  • Holmes, Jessica

    ()
    (Middlebury College)

  • Matthews, Peter Hans

    ()
    (Middlebury College)

Abstract

Auctions are a popular way to raise money for charities, but relatively little is known, either theoretically or empirically, about the properties of charity auctions. The small theoretical literature suggests that the all-pay auction should garner more money than winner-pay auctions. We conduct field experiments to test which sealed bid format, first price, second price or all-pay raises the most money. Our experiment suggests that both the all-pay and second price formats are dominated by the first price auction. Our design also allows us to identify differential participation as the source of the difference between existing theory and the field. To conclude, we show that a model of charity auctions augmented by an endogenous participation decision predicts the revenue ordering that we see in the field.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 1330.

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Length: 44 pages
Date of creation: Oct 2004
Date of revision:
Publication status: published in: Economic Journal, 2008, 118 (525), 92-113
Handle: RePEc:iza:izadps:dp1330

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Keywords: charity; auction; field experiment; participation;

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References

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  1. Paul Klemperer, 1999. "Auction Theory: A Guide to the Literature," Economics Series Working Papers 1999-W12, University of Oxford, Department of Economics.
  2. John List & David Reiley, 2008. "Field experiments," Artefactual Field Experiments 00091, The Field Experiments Website.
  3. Engelbrecht-Wiggans Richard, 1994. "Auctions with Price-Proportional Benefits to Bidders," Games and Economic Behavior, Elsevier, vol. 6(3), pages 339-346, May.
  4. Maxim Engers & Brian McManus, 2007. "Charity Auctions," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 48(3), pages 953-994, 08.
  5. Heckman, James, 2013. "Sample selection bias as a specification error," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 31(3), pages 129-137.
  6. ehiel, Philippe & Benny Moldovanu & Ennio Stacchetti, 1994. "How (not) to sell nuclear weapons," Discussion Paper Serie B 288, University of Bonn, Germany.
  7. John List & Matti Liski, 2005. "Introduction," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 31(2), pages 121-121, 06.
  8. Maskin, Eric S & Riley, John G, 1984. "Optimal Auctions with Risk Averse Buyers," Econometrica, Econometric Society, vol. 52(6), pages 1473-1518, November.
  9. David Lucking-Reiley, 1999. "Using Field Experiments to Test Equivalence between Auction Formats: Magic on the Internet," American Economic Review, American Economic Association, vol. 89(5), pages 1063-1080, December.
  10. Laffont, J.J., 1996. "Game Theory and Empirical Economics: The Case of Auction Data," Papers 95.394, Toulouse - GREMAQ.
  11. Arthur J.H.C. Schram & Sander Onderstal, 2009. "Bidding To Give: An Experimental Comparison Of Auctions For Charity," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 50(2), pages 431-457, 05.
  12. Andreoni, James, 1989. "Giving with Impure Altruism: Applications to Charity and Ricardian Equivalence," Journal of Political Economy, University of Chicago Press, vol. 97(6), pages 1447-58, December.
  13. Morgan, John & Sefton, Martin, 2000. "Funding Public Goods with Lotteries: Experimental Evidence," Review of Economic Studies, Wiley Blackwell, vol. 67(4), pages 785-810, October.
  14. David Lucking-Reiley & John A. List, 2000. "Demand Reduction in Multiunit Auctions: Evidence from a Sportscard Field Experiment," American Economic Review, American Economic Association, vol. 90(4), pages 961-972, September.
  15. Gadi Fibich & Arieh Gavious & Aner Sela, 2006. "All-pay auctions with risk-averse players," International Journal of Game Theory, Springer, vol. 34(4), pages 583-599, November.
  16. Stegeman, Mark, 1996. "Participation Costs and Efficient Auctions," Journal of Economic Theory, Elsevier, vol. 71(1), pages 228-259, October.
  17. Samuelson, William F., 1985. "Competitive bidding with entry costs," Economics Letters, Elsevier, vol. 17(1-2), pages 53-57.
  18. Jacob K. Goeree & Emiel Maasland & Sander Onderstal & John L. Turner, 2005. "How (Not) to Raise Money," Journal of Political Economy, University of Chicago Press, vol. 113(4), pages 897-926, August.
  19. Douglas D. Davis & Laura Razzolini & Robert Reilly & Bart J. Wilson, 2003. "Raising Revenues for Charity: Auctions versus Lotteries," Working Papers 0301, VCU School of Business, Department of Economics.
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Cited by:
  1. Stephan Meier, 2006. "Does framing matter for conditional cooperation? Evidence from a natural field experiment," Natural Field Experiments 00309, The Field Experiments Website.
  2. Juan Camilo Cardenas & Rajiv Sethi, 2010. "Resource Allocation in Public Agencies: Experimental Evidence," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 12(4), pages 815-836, 08.
  3. Fong, Christina M. & Luttmer, Erzo F. P., 2007. "What Determines Giving to Hurricane Katrina Victims? Experimental Evidence on Income, Race, and Fairness," Working Paper Series rwp07-032, Harvard University, John F. Kennedy School of Government.
  4. Yongfu He & Peter Popkowski Leszczyc, 2013. "The impact of jump bidding in online auctions," Marketing Letters, Springer, vol. 24(4), pages 387-397, December.
  5. Juan Camilo Cárdenas & Rajiv Sethi, 2007. "Attitudes and attributes: a field experiment with public officials and transfer recipients In Colombia," DOCUMENTOS CEDE 006881, UNIVERSIDAD DE LOS ANDES-CEDE.

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