Open AccessWhy are open ascending auctions popular? The role of information aggregation and behavioral biases
Author(s) -
Offerman Theo,
Romagnoli Giorgia,
Ziegler Andreas
Publication year - 2022
Publication title -
quantitative economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 4.062
H-Index - 27
eISSN - 1759-7331
pISSN - 1759-7323
DOI - 10.3982/qe1692
Subject(s) - common value auction , bidding , microeconomics , revenue , popularity , vickrey auction , economics , proxy bid , business , auction theory , finance , law , political science
The popularity of open ascending auctions is often attributed to the fact that openly observable bidding allows to aggregate dispersed information. Another reason behind the frequent utilization of open auction formats may be that they activate revenue enhancing biases. In an experiment, we compare three auctions that differ in how much information is revealed and in the potential activation of behavioral biases: (i) the ascending Vickrey auction, a closed format; and two open formats, (ii) the Japanese–English auction, and (iii) the Oral Outcry auction. Even though bidders react to information conveyed in others' bids, information aggregation fails in both open formats. In contrast, the Oral Outcry raises higher revenue than the other two formats by stimulating bidders to submit unprofitable jump bids and triggering a quasi‐endowment effect.