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The B.E. Journal of Theoretical Economics

Editor-in-Chief: Schipper, Burkhard

Ed. by Cervellati, Matteo / Fong, Yuk-fai / Peeters, Ronald / Puzzello , Daniela / Rivas, Javier

2 Issues per year


IMPACT FACTOR increased in 2014: 0.300

SCImago Journal Rank (SJR): 1.056
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Mathematical Citation Quotient 2013: 0.12

An Experimental Comparison of Sequential First- and Second-Price Auctions with Synergies

Kasper Leufkens1 / Ronald Peeters2 / Marc Vorsatz3

1Department of Economics, Maastricht University, Maastricht, The Netherlands,

2Department of Economics, Maastricht University, Maastricht, The Netherlands,

3Departamento de Análisis Ecónomico II, Universidad Nacional de Educación a Distancia, Madrid, Spain,

Citation Information: The B.E. Journal of Theoretical Economics. Volume 12, Issue 1, ISSN (Online) 1935-1704, DOI: 10.2202/1935-1704.1608, January 2012

Publication History

Published Online:
2012-01-04

Using laboratory experiments, we compare the performance of first-price and second-price auctions when two stochastically equivalent objects are auctioned sequentially and the winner of the first auction receives a positive synergy in the second auction. According to the risk-neutral subgame perfect Nash equilibrium, the second-price auction provides more efficiency and a higher revenue to the seller, but a lower ex ante expected payoff to the bidders. Our experimental data indicate precisely the opposite results for format comparisons: the first-price auction gives rise to larger levels of efficiency and revenue, but lower payoffs to the bidders. Despite the lower payoff, the likelihood of an ex post loss is also smaller under the first-price auction. Our results therefore support the common use of the first-price auction in governmental and business-to-business procurements.

Keywords: sequential auction; synergies; option value; exposure problem; experiment

Citing Articles

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[1]
Anthony M. Kwasnica and Katerina Sherstyuk
Journal of Economic Surveys, 2013, Volume 27, Number 3, Page 461
[2]
Viplav Saini and Jordan F. Suter
Economic Inquiry, 2015, Volume 53, Number 2, Page 1236

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