Radosveta Ivanova-Stenzel

Revenue Equivalence Revisited

The conventional wisdom in the auction design literature is that first price sealed bid auctions tend to make more money while ascending auctions tend to be more efficient. We re-examine these issues in an environment in which bidders are allowed to endogenously choose in which auction format to participate. Our findings are that more bidders choose to enter the ascending auction than the first price sealed bid auction and this extra entry is enough to make up the revenue difference between the formats. Consequently, we find that both formats raise approximately the same amount of revenue. They also generate efficiency levels and bidder earnings that are roughly equivalent across mechanisms though the earnings in the ascending might be slightly higher.

Bid Functions in Auctions and Fair Division Games: Experimental Evidence

Abstract In auctions a seller offers a commodity for sale and collects the revenue. In fair division games the object is collectively owned by the group of bidders who equally share the revenue. We run an experiment in which the participants face four types of allocation games (auctions and fair division game under two price rules, first- versus second-price rule). We collect entire bid functions rather than bids for single values and investigate price and efficiency of the different trading institutions. We find that the first-price auction is more efficient than the second-price auction, whereas economic rationality assuming heterogeneous bidders suggests the opposite. Furthermore, we study the structure of individual bid functions.

The high/low divide: Self-selection by values in auction choice

Most prior theoretical and experimental work involving auction choice has assumed bidders only find out their value after making a choice of which autcion to enter. In this paper we examine whether or not subjects knowing their value prior to making an auction choice impacts their choice decision and/or the outcome of the auctions. The results show a strong impact. Subjects with low values choose the first price sealed bid auction more often while subjects with high values choose the ascending auction more often. The average numbers of bidders in both formats ended up being on average the same, but due to the self-selection bias the ascending auction raised as much revenue on average as the first sealed bid auction. The two formats also generate efficiency levels that are roughly equivalent though the earnings of bidders are higher in the ascending auction.

Entry Fees and Endogenous Entry in Electronic Auctions

When conducting electronic auctions, sellers obviously wish to maximize their revenue and one tool economic theory suggests they might use is an entry fee. By charging bidders a certain amount for entering an auction, the seller can theoretically extract more surplus from those bidders that choose to enter the auction. The problem a seller faces is that the use of an entry fee might discourage entry. This paper uses economic experiments to address the question of whether or not entry fees can be used by an auctioneer in conjunction with an auction format bidders tend to prefer to raise revenue in the presence of the possibility for buyers to choose between entering the preferred auction with an entry fee or a less preferred alternative auction with a lower fee. Our results show that even though buyers appear to have quite strong preferences for certain auction formats, the preferences are not strong enough to be profitably exploited by entry fees.

Asymmetric auction experiments with(out) commonly known beliefs

Abstract Are commonly known beliefs essential for bidding behavior in asymmetric auctions? Our experimental results suggest that not informing participants how values are randomly generated does not change behavior much and may even make it appear more rational.

Investment and Bargaining in Joint Ventures: A Family Decision Making Experiment

Bilateral joint ventures, such as marriage, are economically inspired by their prospects of labor division and specialization. However, specialization makes the partnerwho investsmore in relation-specificqualificationsmore exploitable (holdup problem). In a two-person experiment we study investment and bargaining behavior when specialization improves the chances to win a large prize. A low (full) joint venture relies on an intermediate (high) degree of specialization and low (high) costs in case of failure, e.g., a divorce. Results show that participants choose endogenouslymore efficient joint-venture types and acceptminor attempts at exploitation when bargaining over the revenues of the joint venture.

Auctions and Fair Division Games Under Different Price Rules

In auctions an outside seIler offers a commodity for sale and collects the revenue w hich is achieved. In fair division games the object is owned by the group of bidders. Consequently the auctions revenue is equally distributed among all bidders. In our experiment participants face four auction types (first versus second price - auction versus fair division game) repeteadly. Due to the strategy method (one bids before learning ones private value) we can investigate the slope and curvature of individual bid functions) the evidence for risk aversion, the comparative statics with respect to the game type, the price expectations and the efficiency rates.