Time is money: The effect of clock speed on seller’s revenue in Dutch auctions
We study the role of timing in auctions under the premise that time is a valuable resource. When one object is for sale, Dutch and first-price sealed bid auctions are strategically equivalent in standard models, and therefore, they should yield the same revenue for the auctioneer. We study Dutch and first-price sealed bid auctions in the laboratory, with a specific emphasis on the speed of the clock in the Dutch auction. At fast clock speeds, revenue in the Dutch auction is significantly lower than it is in the sealed bid auction. When the clock is sufficiently slow, however, revenue in the Dutch auction is higher than the revenue in the sealed bid auction. We develop and test a simple model of auctions with impatient bidders that is consistent with these laboratory findings.
KeywordsAuctions Experimental economics
Unable to display preview. Download preview PDF.
- Camerer, C. (1995). Individual decision making. In J. H. Kagel & A. E. Roth (Eds.), The handbook of experimental economics (pp. 587–703). Princeton: Princeton University Press. Google Scholar
- Cox, J., Roberson, R., & Smith, V. L. (1982). Theory and behavior of single object auctions. Research in Experimental Economics, 1, 61–99. Google Scholar
- Engelbrecht-Wiggans, R. (1989). The effect of regret on optimal bidding in auctions. Management Science, 35(6), 685–692. Google Scholar
- Kagel, J. H. (1995) Auctions. In J. H. Kagel & A. E. Roth (Eds.), The handbook of experimental economics (pp. 501–585). Princeton: Princeton University Press. Google Scholar
- Katok, E., & Kwasnica, A. (2004). Time is money: the effect of clock speed on seller’s revenue in Dutch auctions. Working paper. Google Scholar
- Levin, D., & Smith, J. L. (1994). Equilibrium auctions with entry. American Economic Review, 84, 585–599. Google Scholar
- Reynolds, S., & Wooders, J. (2003). Auctions with a buy price. University of Arizona Working Paper #03-01. Google Scholar