Theoretical and experimental analysis of auctions with negative externalities
We investigate a private value auction in which a single “entrant” on winning imposes a
negative externality on two “regular” bidders. In an English auction when all bidders are
active,“regular” bidders free ride, exiting before price reaches their values. In a first-price
sealed-bid auction incentives for free riding and aggressive bidding coexist, limiting free
riding compared to the English auction. We find substantial, though incomplete, free riding in
the clock auction. In first-price auctions, regular bidders bid more aggressively than the …
negative externality on two “regular” bidders. In an English auction when all bidders are
active,“regular” bidders free ride, exiting before price reaches their values. In a first-price
sealed-bid auction incentives for free riding and aggressive bidding coexist, limiting free
riding compared to the English auction. We find substantial, though incomplete, free riding in
the clock auction. In first-price auctions, regular bidders bid more aggressively than the …
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