Signalling in Auctions: Experimental Evidence

Olivier Bos (ENS Paris-Saclay) & Francisco Gómez Martínez & Sander Onderstal & Tom Truyts (UC Louvain)

 

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.

 

Published in

Journal of Economic Behavior & Organization, vol. 187, pp. 448-469. DOI: 10.1016/j.jebo.2021.04.001, 2021

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