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Charity Auctions: A Field Experimental Investigation

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Author Info
Carpenter, Jeffrey () (Middlebury College and IZA Bonn)
Holmes, Jessica (Middlebury College)
Matthews, Peter Hans (Middlebury College)

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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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Publisher 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:
Handle: RePEc:iza:izadps:dp1330

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Related research
Keywords: auction; charity; participation; field experiment;

Other versions of this item:

Find related papers by JEL classification:
C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
D64 - Microeconomics - - Welfare Economics - - - Altruism

This paper has been announced in the following NEP Reports:

References listed on IDEAS
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  1. Glenn W. Harrison & John A. List, 2004. "Field Experiments," Journal of Economic Literature, American Economic Association, vol. 42(4), pages 1009-1055, December. [Downloadable!] (restricted)
  2. Samuelson, William F., 1985. "Competitive bidding with entry costs," Economics Letters, Elsevier, vol. 17(1-2), pages 53-57. [Downloadable!] (restricted)
  3. Heckman, James J, 1979. "Sample Selection Bias as a Specification Error," Econometrica, Econometric Society, vol. 47(1), pages 153-61, January. [Downloadable!] (restricted)
  4. 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. [Downloadable!]
  5. Morgan, John & Sefton, Martin, 2000. "Funding Public Goods with Lotteries: Experimental Evidence," Review of Economic Studies, Blackwell Publishing, vol. 67(4), pages 785-810, October.
  6. 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. [Downloadable!] (restricted)
  7. Klemperer, P., 1999. "Auction Theory: a Guide to the Literature," Economics Papers 1999-w12, Economics Group, Nuffield College, University of Oxford.
    Other versions:
  8. John A. List & David Lucking-Reiley, 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. [Downloadable!] (restricted)
  9. Stegeman, Mark, 1996. "Participation Costs and Efficient Auctions," Journal of Economic Theory, Elsevier, vol. 71(1), pages 228-259, October. [Downloadable!] (restricted)
  10. David Lucking-Reiley, 1999. "Using field experiments to test equivalence between auction formats: Magic On the Internet," Framed Field Experiments 0055, The Field Experiments Website. [Downloadable!]
  11. 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. [Downloadable!] (restricted)
  12. Laffont, Jean-Jacques, 1997. "Game theory and empirical economics: The case of auction data 1," European Economic Review, Elsevier, vol. 41(1), pages 1-35, January. [Downloadable!] (restricted)
    Other versions:
  13. Jehiel, Philippe & Moldovanu, Benny & Stacchetti, Ennio, 1996. "How (Not) to Sell Nuclear Weapons," American Economic Review, American Economic Association, vol. 86(4), pages 814-29, September. [Downloadable!] (restricted)
    Other versions:
  14. 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.
  15. Jeffrey P. Carpenter & Glenn W. Harrison, 2005. "Field Experiments in Economics: An Introduction," Artefactual Field Experiments 0030, The Field Experiments Website. [Downloadable!]
  16. 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. [Downloadable!] (restricted)
  17. Engelbrecht-Wiggans Richard, 1994. "Auctions with Price-Proportional Benefits to Bidders," Games and Economic Behavior, Elsevier, vol. 6(3), pages 339-346, May. [Downloadable!] (restricted)
  18. Maskin, Eric S & Riley, John G, 1984. "Optimal Auctions with Risk Averse Buyers," Econometrica, Econometric Society, vol. 52(6), pages 1473-1518, November. [Downloadable!] (restricted)
    Other versions:
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