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Signaling in auctions: experimental evidence

Author

Listed:
  • Olivier Bos
  • Francisco Gomez-Martinez
  • Sander Onderstal
  • Tom Truyts

Abstract

We study the relative performance of the first-price sealed-bid auction and the second-price sealed-bid auction in a laboratory experiment where bidders can signal information through their bidding behavior to an outside observer. We consider two different information settings: the auctioneer reveals either the identity of the winning bidder only, or she also reveals the winner’s payment to an outside observer. We find that the first-price sealed-bid auction in which the winner’s payment is revealed outperforms the other mechanisms in terms of revenue and efficiency. Our findings may have implications for the design of charity auctions, art auctions, and spectrum auctions.

Suggested Citation

  • Olivier Bos & Francisco Gomez-Martinez & Sander Onderstal & Tom Truyts, 2017. "Signaling in auctions: experimental evidence," Working Papers of Department of Economics, Leuven 585499, KU Leuven, Faculty of Economics and Business (FEB), Department of Economics, Leuven.
    • Handle: RePEc:ete:ceswps:585499
    Note: paper number DPS 17.08
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    Cited by:

    1. is not listed on IDEAS
    2. Olivier Bos & Francisco Gomez-Martinez & Sander Onderstal, 2022. "Signalling in auctions for risk-averse bidders," PLOS ONE, Public Library of Science, vol. 17(10), pages 1-8, October.
    3. Miguel A. Fonseca & Francesco Giovannoni & Miltiadis Makris, 2020. "Auctions with external incentives: experimental evidence," International Journal of Game Theory, Springer;Game Theory Society, vol. 49(4), pages 1003-1043, December.
    4. Johan Fourie & Tessa Hubble & Jonathan Schoots, 2025. "The price of status: Findings from Cape auctions," Working Papers 03/2025, Stellenbosch University, Department of Economics.

    More about this item

    JEL classification:

    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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