Publication:
Entry into auctions: an experimental analysis

dc.contributor.coauthorHortacsu, Ali
dc.contributor.coauthorRoberts, James W.
dc.contributor.departmentDepartment of Economics
dc.contributor.kuauthorErtaç, Seda
dc.contributor.schoolcollegeinstituteCollege of Administrative Sciences and Economics
dc.date.accessioned2024-11-09T23:50:48Z
dc.date.issued2011
dc.description.abstractThis paper investigates entry decisions into first and second-price auctions using an experimental design to extract information on willingness-to-pay to enter (WTE). We find that subjects tend to overpay to enter both auction formats. In particular, if the subjects believe they will be bidding against bidders following the risk-neutral Nash strategy, their WTE is greater than the optimal risk-neutral amount 97% of the time for first-price auctions (FPA) and 90% for second-price auctions (SPA). If they believe that they are bidding against subjects who bid as do the other subjects, they submit a WIT that is too high 92% of the time for FPA and 69% of the time for SPA. We also find, in line with previous studies, significant overbidding in both the FPA and SPA. We then investigate whether introducing risk aversion (RA) or "joy of winning" (JOY) can explain the joint observation of over-entry and overbidding. In particular, using bid data alone, we structurally estimate three models, one allowing RA only, one allowing for JOY only and one allowing for both RA and JOY. While a model with JOY alone overestimates WTE, we find that RA alone can explain 38% of WTE but a model with both RA and JOY (where RA is estimated using FPA bids, and JOY is estimated using SPA bids) can explain 65% of WTE. Moreover, JOY appears to explain nearly all of the male WTE but only 44% of the female WTE. (C) 2010 Elsevier B.V. All rights reserved.
dc.description.indexedbyWOS
dc.description.indexedbyScopus
dc.description.issue2
dc.description.openaccessYES
dc.description.publisherscopeInternational
dc.description.sponsoredbyTubitakEuN/A
dc.description.volume29
dc.identifier.doi10.1016/j.ijindorg.2010.03.009
dc.identifier.eissn1873-7986
dc.identifier.issn0167-7187
dc.identifier.quartileQ3
dc.identifier.scopus2-s2.0-79951680123
dc.identifier.urihttps://doi.org/10.1016/j.ijindorg.2010.03.009
dc.identifier.urihttps://hdl.handle.net/20.500.14288/14597
dc.identifier.wos288471900002
dc.keywordsLaboratory experiment
dc.keywordsEntry
dc.keywordsAuctions
dc.keywordsRisk aversion
dc.keywordsJoy of winning
dc.keywordsGender
dc.language.isoeng
dc.publisherElsevier
dc.relation.ispartofInternational Journal of Industrial Organization
dc.subjectEconomics
dc.titleEntry into auctions: an experimental analysis
dc.typeJournal Article
dspace.entity.typePublication
local.contributor.kuauthorErtaç, Seda
local.publication.orgunit1College of Administrative Sciences and Economics
local.publication.orgunit2Department of Economics
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relation.isOrgUnitOfPublication.latestForDiscovery7ad2a3bb-d8d9-4cbd-a6a3-3ca4b30b40c3
relation.isParentOrgUnitOfPublication972aa199-81e2-499f-908e-6fa3deca434a
relation.isParentOrgUnitOfPublication.latestForDiscovery972aa199-81e2-499f-908e-6fa3deca434a

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