Outside options: Another reason to choose the first-price auction |
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Authors: | Oliver Kirchkamp |
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Institution: | a University of Jena, Germany b University of Nottingham, UK c Maastricht University, Economics Department, P.O. Box 616, 6200 MD Maastricht, The Netherlands |
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Abstract: | In this paper we study equilibrium and experimental bidding behaviour in first-price and second-price auctions with outside options.We find that bidders do respond to outside options and to variations of common knowledge about competitors’ outside options. However, overbidding in first-price auctions is significantly higher with outside options than without. First-price auctions yield more revenue than second-price auctions. This revenue-premium is significantly higher with outside options. In second-price auctions the introduction of outside options has only a small effect. |
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Keywords: | C72 C92 D44 |
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