Selling shares to budget-constrained bidders: an experimental study of the proportional auction

We explore the efficiency and revenue of proportional auctions (PA) compared to first price auction (FPA) for budget-constrained bidders. PA auctions have been used in privatization of Russian assets and in cryptocurrency sales, as they can achieve higher efficiency and revenue than FPAs when bidder...

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Bibliographic Details
Published in:Journal of the Economic Science Association 2022-12, Vol.8 (1-2), p.45-55
Main Authors: Bae, Jinsoo, Kagel, John H.
Format: Article
Language:English
Subjects:
Behavioral/Experimental Economics
Economic Theory/Quantitative Economics/Mathematical Methods
Economics
Economics and Finance
Game Theory
Microeconomics
Operations Research/Decision Theory
Original Paper
Social and Behav. Sciences
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Summary:We explore the efficiency and revenue of proportional auctions (PA) compared to first price auction (FPA) for budget-constrained bidders. PA auctions have been used in privatization of Russian assets and in cryptocurrency sales, as they can achieve higher efficiency and revenue than FPAs when bidders face severe financial constraints. The experimental results support this in that under a tight budget constraint PA achieved higher revenue and efficiency than FPA, with these results reversed under a looser budget constraint. Detailed patterns of bidding are compared to the theoretical predictions for both PA and FPA.
ISSN:2199-6784
2199-6776
2199-6784
DOI:10.1007/s40881-022-00119-x