Working Paper: CEPR ID: DP4678
Authors: Kfir Eliaz; Theo Offerman; Andrew Schotter
Abstract: We study a procedure for selling multiple heterogenous goods, which is commonly used in practice but rarely studied in the literature. The novel feature of this procedure is that instead of selling the goods themselves, the seller offers buyers the right to choose among the available goods. Thus, buyers who are after completely different goods are forced to compete for the same good, the ?right to choose?. Competition can be further enhanced by restricting the number of rights that are sold. This is shown both theoretically and experimentally. Our main experimental finding is that by auctioning ?rights-to-choose? rather than the goods themselves, the seller induces an aggressive bidding behaviour that generates more revenue than the theoretical optimal mechanism.
Keywords: Behavioural; Mechanism Design; Experimental Auctions; Right-to-Choose Auctions
JEL Codes: C91; D44
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| right-to-choose (RTC) auction format (D44) | aggressive bidding behavior (D44) |
| right-to-choose (RTC) auction format (D44) | higher revenues (H27) |
| quantity restrictions in RTC auctions (D44) | higher revenues (H27) |
| bidding behavior in RTC auctions (D44) | higher bids than standard auction theory predictions (D44) |