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Multi-good Demand in Bidder's Choice Auctions: Experimental Evidence from the Lab and the Field

Author

Listed:
  • Jonathan E. Alevy

    () (Department of Economics, University of Alaska Anchorage)

  • Julianna Butler

    () (Department of Economics, University of Delaware)

  • Michael Price

    (Department of Economics, Georgia State University)

Abstract

Economic theory has shown that bidder’s choice auctions result in higher revenues than traditional good-by-good auctions, if bidders are risk-averse. Most theoretical and experimental work focuses on bidder’s choice auctions where bidders value only one of the available goods. We report results from lab and field experiments that examine multi-good demand, which is common in bidder’s choice auctions used in field settings. We also implement treatments that vary revelation of price. Information. We find that while price revelation does not have a significant effect on revenue, multi-good demand mutes the theoretical revenue superiority the bidder’s choice mechanism. This is consistent with the notion that the perceived risk of losing one’s most preferred good is softened when there is a chance to win other goods. This result implies that bidder’s choice auctions should be used in settings where each bidder is likely to strongly prefer one good over the others, though this need not be the same good for every bidder. Further, this work demonstrates the complementarities of the field and laboratory settings to answer questions which are not clearly resolved using only one setting.

Suggested Citation

  • Jonathan E. Alevy & Julianna Butler & Michael Price, 2016. "Multi-good Demand in Bidder's Choice Auctions: Experimental Evidence from the Lab and the Field," Working Papers 2016-01, University of Alaska Anchorage, Department of Economics.
  • Handle: RePEc:ala:wpaper:2016-01
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    File URL: http://www.econpapers.uaa.alaska.edu/RePEC/ala/wpaper/ALA201601.pdf
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    References listed on IDEAS

    as
    1. Jacob K. Goeree & Charles R. Plott & John Wooders, 2004. "Bidders' Choice Auctions: Raising Revenues Through the Right to Choose," Journal of the European Economic Association, MIT Press, vol. 2(2-3), pages 504-515, 04/05.
    2. Burguet, Roberto, 2007. "Right to choose in oral auctions," Economics Letters, Elsevier, vol. 95(2), pages 167-173, May.
    3. Alevy, Jonathan E. & Cristi, Oscar & Melo, Oscar, 2010. "Right-to-Choose Auctions: A Field Study of Water Markets in the Limari Valley of Chile," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 39(2), pages 1-14, April.
    4. Menezes, Flavio M & Monteiro, Paulo Klinger, 1998. "Simultaneous Pooled Auctions," The Journal of Real Estate Finance and Economics, Springer, vol. 17(3), pages 219-232, November.
    5. 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.
    6. Ashenfelter, Orley & Genesove, David, 1992. "Testing for Price Anomalies in Real-Estate Auctions," American Economic Review, American Economic Association, vol. 82(2), pages 501-505, May.
    7. Ronald M. Harstad, 2010. "Auctioning the Right to Choose When Competition Persists," Decision Analysis, INFORMS, vol. 7(1), pages 78-85, March.
    8. Roberto Burguet, 2005. "The condominium problem; auctions for substitutes," Review of Economic Design, Springer;Society for Economic Design, vol. 9(2), pages 73-90, April.
    9. repec:feb:framed:0082 is not listed on IDEAS
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    More about this item

    Keywords

    experimental economics; field experiment; lab experiment; auction; bidder's choice;

    JEL classification:

    • D70 - Microeconomics - - Analysis of Collective Decision-Making - - - General
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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