Revenue implication of auction value in <Emphasis Type="Italic">k</Emphasis>-price sealed-bid auctions: An experimental study |
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Authors: | Wei Shi Lim Joo Eng Lee-Partridge Soo Jiuan Tan |
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Institution: | (1) NUS Business School, BIZ 1 Building #04-19, 1 Business Link, Singapore, 117592, Singapore;(2) Department of MIS, Central Connecticut State University, 1615 Stanley Street, New Britain, CT 06050, USA |
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Abstract: | In this paper, we show that in a heterogeneous bidding community with predominantly risk-seeking bidders, third-price sealed-bid
auctions yield higher revenue for the seller than first-price sealed-bid auctions when the auction value is low. Conversely,
when the value of the auction is high, first-price sealed-bid auctions yield higher revenue for the seller than third-price
sealed-bid auctions. Existing theoretical findings for a homogeneous group of risk-seeking individuals imply that third-price
sealed-bid auctions should generate higher revenues for the seller than first-price sealed-bid auctions. Our results for low-value
auctions agree but our results for high-value auctions do not agree with the existing findings. We discuss the implications
of this discrepancy as a function of the shift in goal orientation from a win-focus to a value-focus as the value of the auction
increases.
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Keywords: | Sealed-bid auction Auction value Experimental design |
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