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Endogenous entry and self-selection in private value auctions: An experimental study

Palfrey, Thomas R. and Pevnitskaya, Svetlana (2008) Endogenous entry and self-selection in private value auctions: An experimental study. Journal of Economic Behavior and Organization, 66 (3). pp. 731-747. ISSN 0167-2681. https://resolver.caltech.edu/CaltechAUTHORS:20160303-150527129

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Abstract

This paper presents the results of an experimental study of endogenous entry in first-price independent private value auctions. N potential bidders simultaneously decide whether to participate in an auction or receive a known outside option. In the second stage, entrants submit bids after learning their own private values and the number of entrants. An equilibrium model of heterogeneous risk averse bidders implies a self-selection effect, where bidding in the auction is lower with endogenous entry because only less risk averse bidders enter. This effect is confirmed by the experiment. We also observe excessive entry relative to the theoretical model.


Item Type:Article
Related URLs:
URLURL TypeDescription
http://dx.doi.org/10.1016/j.jebo.2006.06.005DOIArticle
http://www.sciencedirect.com/science/article/pii/S0167268107000066PublisherArticle
ORCID:
AuthorORCID
Palfrey, Thomas R.0000-0003-0769-8109
Additional Information:© 2007 Elsevier B.V. All rights reserved. We thank Richard Day, John Kagel, Bentley MacLeod, John Morgan, Eric Talley, Quong Vuong, two referees, and seminar participants at Caltech, Ohio State University, Texas A & M University, University of Southern California, and the 2000 Meeting of the Economic Science Association for helpful comments. Financial support was provided by the Hacker Social Science Experimental Laboratory at Caltech and the National Science Foundation (SES-9631627 and SES-0079301). We thank James Walker for sharing data.
Group:Social Science Working Papers
Funders:
Funding AgencyGrant Number
NSFSES-9631627
NSFSES-0079301
Subject Keywords:Auctions; Experimental economics; Game theory
Other Numbering System:
Other Numbering System NameOther Numbering System ID
Social Science Working Paper1172
Issue or Number:3
Classification Code:JEL: D44; C72; C9
Record Number:CaltechAUTHORS:20160303-150527129
Persistent URL:https://resolver.caltech.edu/CaltechAUTHORS:20160303-150527129
Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:65039
Collection:CaltechAUTHORS
Deposited By: Susan Vite
Deposited On:05 Apr 2016 18:56
Last Modified:22 Nov 2019 09:58

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