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Auctions and Leaks: A Theoretical and Experimental Investigation Auctions and Leaks: A Theoretical and Experimental Investigation

Author

Listed:
  • Sven Fischer

    (Newcastle University Business School)

  • Werner Güth

    (LUISS Rome, Frankfurt School of Finance and Management, and Max Planck Institute on Collective Goods Bonn)

  • Todd R. Kaplan

    (University of Exeter and University of Haifa)

  • Ro'i Zultan

    (Ben-Gurion University of the Negev)

Abstract

(Revised Version of JERP 2014-027) In first- and second-price private value auctions with sequential bidding, second movers may discover the first movers' bid. Equilibrium behavior in the first-price auction is mostly unaffected but there are multiple equilibria in the second- price auction. Consequently, comparative statics across price rules are equivocal. Experimentally, leaks in the first-price auction favor second movers but harm first movers and sellers, as theoretically predicted. Low to medium leak probabilities eliminate the usual revenue dominance of first-over second-price auctions. With a high leak probability, second-price auctions generate significantly more revenue.

Suggested Citation

  • Sven Fischer & Werner Güth & Todd R. Kaplan & Ro'i Zultan, 2017. "Auctions and Leaks: A Theoretical and Experimental Investigation Auctions and Leaks: A Theoretical and Experimental Investigation," Jena Economics Research Papers 2017-012, Friedrich-Schiller-University Jena.
    • Handle: RePEc:jrp:jrpwrp:2017-012
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    References listed on IDEAS

    as
    1. Lengwiler, Yvan & Wolfstetter, Elmar, 2010. "Auctions and corruption: An analysis of bid rigging by a corrupt auctioneer," Journal of Economic Dynamics and Control, Elsevier, vol. 34(10), pages 1872-1892, October.
    2. Charness, Gary B & Rabin, Matthew, 2001. "Understanding Social Preferences With Simple Tests," University of California at Santa Barbara, Economics Working Paper Series qt0dc3k4m5, Department of Economics, UC Santa Barbara.
    3. Ella Segev & Aner Sela, 2014. "Sequential all-pay auctions with head starts," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 43(4), pages 893-923, December.
    4. 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. Aniol Llorente-Saguer & Ro’i Zultan, 2014. "Auction Mechanisms And Bidder Collusion: Bribes, Signals And Selection," Working Papers 1406, Ben-Gurion University of the Negev, Department of Economics.
    3. Pacharasut Sujarittanonta & Ajalavat Viriyavipart, 2021. "Deterring collusion with a reserve price: an auction experiment," Experimental Economics, Springer;Economic Science Association, vol. 24(2), pages 536-557, June.
    4. Llorente-Saguer, Aniol & Zultan, Ro’i, 2017. "Collusion and information revelation in auctions," European Economic Review, Elsevier, vol. 95(C), pages 84-102.
    5. Mill, Wladislaw & Morgan, John, 2022. "Competition between friends and foes," European Economic Review, Elsevier, vol. 147(C).

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    More about this item

    Keywords

    auction; espionage; collusion; laboratory experiment;
    All these keywords.

    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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