A Caltech Library Service

Endogenous Entry and Self-selection in Private Value Auctions: An Experimental Study

Palfrey, Thomas R. and Pevniskaya, Svetlana (2003) Endogenous Entry and Self-selection in Private Value Auctions: An Experimental Study. Social Science Working Paper, 1172. California Institute of Technology , Pasadena, CA. (Unpublished)

[img] PDF (sswp 1172 - Aug. 2003) - Submitted Version
See Usage Policy.


Use this Persistent URL to link to this item:


This paper presents the results of an experimental study of endogenous entry and bidding behavior in first-price independent private value auctions. In the first stage N potential bidders simultaneously decide whether to participate in an auction or to claim a fixed outside option. At this stage all potential bidders know N, the distribution of possible values, and the value of the outside option. In the second stage, each entering bidder submits a bid after learning their own private value for the object and the number of entering bidders. We find evidence of self-selection effect, as predicted by an equilibrium model of heterogeneous risk averse bidders. The theoretical model predicts that bidding in the auction will be lower with endogenous entry because only the less risk averse bidders will choose to enter. We also find that entry decreases with the value of the outside option, as predicted. One surprising finding is that we observe over-entry relative to the theoretical predictions.

Item Type:Report or Paper (Working Paper)
Related URLs:
URLURL TypeDescription ItemSupplementary Material
Palfrey, Thomas R.0000-0003-0769-8109
Additional Information:Revised version. Original dated to February 2003. We would like to thank Richard Day, W. Bentley MacLeod, John Morgan, Eric Talley, Quang Vuong, 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 many helpful comments. Financial support was provided by the Hacker Social Science Experimental Laboratory and the National Science Foundation (SES-9631627 and SES-0079301). We thank James Walker for sharing data. Published as Palfrey, T.R., & Pevnitskaya, S. (2008). Endogenous entry and self-selection in private value auctions: An experimental study. Journal of Economic Behavior & Organization, 66(3), 731-747.
Group:Social Science Working Papers
Funding AgencyGrant Number
Caltech Social Science Experimental LaboratoryUNSPECIFIED
Subject Keywords:auctions, experimental economics, game theory
Series Name:Social Science Working Paper
Issue or Number:1172
Classification Code:JEL: D44, C72, C9
Record Number:CaltechAUTHORS:20170731-171226910
Persistent URL:
Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:79649
Deposited By: Jacquelyn Bussone
Deposited On:01 Aug 2017 20:56
Last Modified:22 Nov 2019 09:58

Repository Staff Only: item control page