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Charity Auctions: A Field Experimental Investigation

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  • Peter Hans Matthews

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  • Jeffrey Carpenter

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  • Jessica Holmes

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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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File URL: http://www.middlebury.edu/services/econ/repec/mdl/ancoec/0417.pdf
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Bibliographic Info

Paper provided by Middlebury College, Department of Economics in its series Middlebury College Working Paper Series with number 0417.

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Length: 42 pages
Date of creation: Sep 2004
Date of revision:
Handle: RePEc:mdl:mdlpap:0417

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References

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  1. John List & David Reiley, 2008. "Field experiments," Artefactual Field Experiments 00091, The Field Experiments Website.
  2. 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.
  3. 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.
  4. Paul Klemperer, 1999. "Auction Theory: A Guide to the Literature," Microeconomics 9903002, EconWPA.
  5. Samuelson, William F., 1985. "Competitive bidding with entry costs," Economics Letters, Elsevier, vol. 17(1-2), pages 53-57.
  6. Heckman, James J, 1979. "Sample Selection Bias as a Specification Error," Econometrica, Econometric Society, vol. 47(1), pages 153-61, January.
  7. 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.
  8. Stegeman, Mark, 1996. "Participation Costs and Efficient Auctions," Journal of Economic Theory, Elsevier, vol. 71(1), pages 228-259, October.
  9. 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.
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  11. Engelbrecht-Wiggans Richard, 1994. "Auctions with Price-Proportional Benefits to Bidders," Games and Economic Behavior, Elsevier, vol. 6(3), pages 339-346, May.
  12. 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.
  13. John List & Matti Liski, 2005. "Introduction," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 31(2), pages 121-121, 06.
  14. 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.
  15. 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.
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  17. 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.
  18. 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.
  19. 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.
  20. J. Riley & E. Maskin, 1981. "Optimal Auctions with Risk Averse Buyers," Working papers 311, Massachusetts Institute of Technology (MIT), Department of Economics.
  21. 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.
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Cited by:
  1. 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.
  2. Stephan Meier, 2006. "Does framing matter for conditional cooperation? Evidence from a natural field experiment," Natural Field Experiments 00309, The Field Experiments Website.
  3. 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.
  4. 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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