Creating competition out of thin air

An experimental study of right-to-choose auctions

Kfir Eliaz, Theo Offerman, Andrew Schotter

    Research output: Contribution to journalArticle

    Abstract

    This paper presents an experimental study of a mechanism that is commonly used to sell multiple heterogeneous goods. The novel feature of this procedure is that instead of selling each good in a separate auction, the seller executes a single auction in which buyers, who may be interested in completely different goods, compete for the right to choose a good. We provide experimental evidence that a Right-to-Choose (RTC) auction can generate more revenue than the theoretically optimal auction. Moreover, in contrast to the "optimal" auction, the RTC auction is approximately efficient in the sense that the surplus it generates is close to the maximal one. Furthermore, a seller who would like to retain some of his goods can generate more revenue with a restricted RTC auction in which not all rights-to-choose are sold, than with the theoretically optimal auction.

    Original languageEnglish (US)
    Pages (from-to)383-416
    Number of pages34
    JournalGames and Economic Behavior
    Volume62
    Issue number2
    DOIs
    StatePublished - Mar 2008

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    Experimental study
    Auctions
    Optimal auction
    Seller
    Revenue
    Buyers
    Surplus

    Keywords

    • Experimental auctions
    • Multiple unit auctions
    • Right-to-Choose auctions

    ASJC Scopus subject areas

    • Economics and Econometrics
    • Finance

    Cite this

    Creating competition out of thin air : An experimental study of right-to-choose auctions. / Eliaz, Kfir; Offerman, Theo; Schotter, Andrew.

    In: Games and Economic Behavior, Vol. 62, No. 2, 03.2008, p. 383-416.

    Research output: Contribution to journalArticle

    Eliaz, Kfir ; Offerman, Theo ; Schotter, Andrew. / Creating competition out of thin air : An experimental study of right-to-choose auctions. In: Games and Economic Behavior. 2008 ; Vol. 62, No. 2. pp. 383-416.
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