CeDEx workshop - Diego Aycinena (Universidad Francisco Marroquín)

Auctions with endogenous entry

Abstract: Attracting bidders to an auction is a “major area of concern of practical auction design” (Klemperer 2002). Yet most of the auction literature studies auctions with a fixed and exogenous set of bidders who do not face entry or participation costs. We report results of an experiment that, to the best of our knowledge, examines for the first time threshold entry decisions, bidding and revenue comparisons between first-price and English clock auctions with informed costly participation. Potential bidders observe their value and then decide whether or not to (incur a cost and) participate in an auction. Our results provide practical insights into the optimal choice for an auction designer who wishes to maximize revenue, and compares theoretical predictions of entry threshold strategies and bidding behavior.