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Entry and Bidding Behavior in Surplus-Extracting Auctions: An Experiment

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  • Takeshi Nishimura
  • Nobuyuki Hanaki

Abstract

We provide experimental evidence on entry and bidding behavior in surplusextracting auctions built on the second-price format. In addition to the simple second-price auction, we consider full- and partial-surplus-extracting auctions. The latter leaves more surplus to bidders under full entry than the former, while preserving the same set of undominated strategies: value bidding and opting out. In contrast to the second-price auction, both auctions exhibit lower entry and overbidding among entrants. Our findings highlight the interplay between entry and bidding behavior, shedding light on the trade-off between surplus extraction and strategic simplicity in auction design with voluntary participation.

Suggested Citation

  • Takeshi Nishimura & Nobuyuki Hanaki, 2024. "Entry and Bidding Behavior in Surplus-Extracting Auctions: An Experiment," ISER Discussion Paper 1266r, Institute of Social and Economic Research, The University of Osaka, revised Sep 2026.
    • Handle: RePEc:dpr:wpaper:1266r
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    File URL: https://www.iser.osaka-u.ac.jp/static/resources/docs/dp/DP1266R.pdf
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