Bidding up, buying out and cooling-off: an examination of auctions with withdrawal rights |
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Authors: | John Asker |
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Institution: | Department of Economics, Harvard University, Littauer Center, 1875 Cambridge St, Cambridge, MA 02138, USA (e-mail: asker@fas.harvard.edu), US
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Abstract: | Summary. This paper considers a model in which bidders in an auction are faced with uncertainty as to their final valuation of the auctioned object. This uncertainty is resolved after the auction has taken place. It is argued that the inclusion of a cooling-off right raises the expected revenue to the seller when bidders face a risk of the object being a strict 'bad', in that owning the object incurs negative utility to the winner of the auction. The model is then tested in a laboratory setting. The evidence from this experiment supports the predictions of the theory. |
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