Auction design and order of sale with budget-constrained bidders

Ulrich Bergmann; Arkady Konovalov

doi:10.1007/s10683-023-09812-y

Auction design and order of sale with budget-constrained bidders

Ulrich Bergmann, Arkady Konovalov^*

^*Corresponding author for this work

Psychology

Research output: Contribution to journal › Article › peer-review

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Abstract

The presence of financial constraints changes traditional auction theory predictions. In the case of multiple items, such constraints may affect revenue equivalence and efficiency of different auction formats. We consider a simple complete information setting with three financially constrained bidders and two items that have different values common to all the bidders. Using a laboratory experiment, we find that, as predicted by theory, it is more beneficial for the seller to sell the higher value item first. We then show that the first-price sealed-bid auction yields higher revenue than the English auction, with significant differences in learning of equilibrium strategies.

Original language	English
Number of pages	22
Journal	Experimental Economics
Early online date	10 Oct 2023
DOIs	https://doi.org/10.1007/s10683-023-09812-y
Publication status	E-pub ahead of print - 10 Oct 2023

Bibliographical note

Acknowledgements:
The authors would like to thank Paul J. Healy, John Kagel, Ian Krajbich, Dan Levin, Ernst Fehr, Alexander Ritschel, Caitlyn Trevor, andmembers of the OSU Theory/Experimental group for their helpful comments and conversations. This study was supported by OSU Decision Sciences Collaborative and Journal of Money, Credit and Banking research grants. All subjects provided written informed consent, and the study was approved by the OSU IRB.

Keywords

Auction
Budget constraints
English auction
First price auction
Experiment

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Cite this

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KW - Experiment

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Auction design and order of sale with budget-constrained bidders

Abstract

Bibliographical note

Keywords

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