Anticipation of Auction Fever: Entry Decision, Reserve Price and the Choice of Auction Design
Article first published online: 21 NOV 2011
Copyright © 2011 John Wiley & Sons, Ltd.
Managerial and Decision Economics
Volume 33, Issue 2, pages 87–98, March 2012
How to Cite
Dodonova, A. and Khoroshilov, Y. (2012), Anticipation of Auction Fever: Entry Decision, Reserve Price and the Choice of Auction Design. Manage. Decis. Econ., 33: 87–98. doi: 10.1002/mde.1563
- Issue published online: 9 JAN 2012
- Article first published online: 21 NOV 2011
- Manuscript Accepted: 17 OCT 2011
- Manuscript Revised: 27 SEP 2011
- Manuscript Received: 20 MAY 2009
- auction fever;
- behavioral economics;
- English auction
This paper analyzes the entry decision of rational bidders who expect to experience auction fever in English auctions. It shows that nonparticipation decision reduces seller's expected profit and this effect may outweigh the positive effect of the auction fever. We analyze the choice between English and second-price sealed-bid auctions and the optimal reserve price in English auctions. We show that it might be optimal for the seller to set a reserve price below her own valuation of the object. Finally, we show that the order in which bidders place their bids matters and the first bidder always has an advantage. Copyright © 2011 John Wiley & Sons, Ltd.