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Auctions and Leaks: A Theoretical and Experimental Investigation

Author

Listed:
  • Sven Fischer

    () (Max Planck Institute of Economics, Jena, and Max Planck Institute for Research on Collective Goods, Bonn)

  • Werner Güth

    () (Max Planck Institute of Economics, Strategic Interaction Group)

  • Todd R. Kaplan

    () (University of Exeter, and University of Haifa)

  • Ro'i Zultan

    () (Ben Gurion University of the Negev)

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.

Suggested Citation

  • Sven Fischer & Werner Güth & Todd R. Kaplan & Ro'i Zultan, 2014. "Auctions and Leaks: A Theoretical and Experimental Investigation," Jena Economic Research Papers 2014-027, Friedrich-Schiller-University Jena.
  • Handle: RePEc:jrp:jrpwrp:2014-027
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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.
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    8. 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.
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    Citations

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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:bpj:bejtec:v:18:y:2018:i:1:p:21:n:20 is not listed on IDEAS
    3. 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.

    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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