Signalling in auctions: Experimental evidence

Abstract

We study the relative performance of the first-price sealed-bid auction, the second-price sealed-bid auction, and the all-pay sealed-bid auction in a laboratory experiment where bidders can signal information through their bidding behaviour to an outside observer. We consider two different information settings: the auctioneer reveals either the identity of the winning bidder only, or she also reveals the bidders' payments to an outside observer. We find that the all-pay sealed-bid auction in which the bidders' payments are revealed outperforms the other mechanisms in terms of revenue, while this mechanism underperforms in terms of efficiency relative to the winner-pay auctions.

Publication
Journal of Economic Behavior & Organization (2021), 187, 448-469
Tom Truyts
Tom Truyts
Professor of Public Economics

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