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Auctions And Leaks: A Theoretical And Experimental Investigation

Author

Listed:
  • Sven Fischer

    () (Max Planck Institute of Economics, Germany)

  • Werner Guth

    () (Max Planck Institute of Economics, Germany)

  • Todd R. Kaplan

    () (University of Exeter, Exeter, EX4 4PU, UK, and University of Haifa, Israel.)

  • Ro'i Zultan

    () (BGU)

Abstract

We study first- and second-price private value auctions with sequential bidding where second movers may discover the first movers bids. There is a unique equilibrium in the first-price auction and multiple equilibria in the second-price auction. Consequently, comparative statics across price rules are equivocal. We experimentally find that in the first-price auction, leaks benefit second movers but harm first movers and sellers. Low to medium probabilities of leak eliminate the usual revenue dominance of first-price over second-price auctions. With a high probability of a leak, second-price auctions generate higher revenue.
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Suggested Citation

  • Sven Fischer & Werner Guth & Todd R. Kaplan & Ro'i Zultan, 2014. "Auctions And Leaks: A Theoretical And Experimental Investigation," Working Papers 1404, Ben-Gurion University of the Negev, Department of Economics.
  • Handle: RePEc:bgu:wpaper:1404
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    File URL: http://in.bgu.ac.il/en/humsos/Econ/Workingpapers/1404.pdf
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    References listed on IDEAS

    as
    1. Gary Charness & Matthew Rabin, 2002. "Understanding Social Preferences with Simple Tests," The Quarterly Journal of Economics, Oxford University Press, vol. 117(3), pages 817-869.
    2. Jeremy Bulow & Paul Klemperer, 2009. "Why Do Sellers (Usually) Prefer Auctions?," American Economic Review, American Economic Association, vol. 99(4), pages 1544-75, September.
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    Cited by:

    1. Aniol Llorente-Saguer & Ro�i Zultan, 2014. "Auction Mechanisms and Bidder Collusion: Bribes, Signals and Selection," Working Papers 734, Queen Mary University of London, School of Economics and Finance.
    2. repec:eee:eecrev:v:95:y:2017:i:c:p:84-102 is not listed on IDEAS
    3. Llorente-Saguer, Aniol & Zultan, Ro’i, 2017. "Collusion and information revelation in auctions," European Economic Review, Elsevier, vol. 95(C), pages 84-102.
    4. repec:bpj:bejtec:v:18:y:2018:i:1:p:21:n:20 is not listed on IDEAS

    More about this item

    Keywords

    auctions; espionage; collusion; laboratory experiments.;

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions

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