Abstract

http://ssrn.com/abstract=358820
 
 

References (9)



 
 

Citations (9)



 


 



Slow Dutch Auctions


Octavian Carare


Federal Communications Commission (FCC)

Michael H. Rothkopf


Rutgers University, Piscataway

June 1, 2001

Management Science, Vol. 51, No. 3, pp. 365-373
Rutcor Research Report No. 42-2001

Abstract:     
Theorists have long believed that Dutch auctions are strategically equivalent to standard sealed bidding. However, in recent controlled experiments with actual Dutch and sealed-bid Internet auctions of collectibles, the Dutch auctions produced significantly more revenue. We believe that this happened, in part, because the Internet Dutch auctions are a slow process in which bidders incur incremental transaction costs if they delay bidding. This paper presents models of slow Dutch auctions that include these costs and explain this belief. We first present a decision-theoretic model of a slow Dutch auction. While simple, the decision-theoretic model is fairly general and provides the basic intuition underlying our revenue results. We then develop a game-theoretic model of a slow Dutch auction. We derive two symmetric, payoff-equivalent equilibria of the game in the absence of a cost of return and then consider the more general case of costly return. When the cost of return is in an appropriate range, the seller's expected revenue is an increasing function of that cost.

Number of Pages in PDF File: 15

Keywords: Dutch auctions

JEL Classification: D44

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Date posted: January 20, 2003 ; Last revised: February 7, 2012

Suggested Citation

Carare, Octavian and Rothkopf, Michael H., Slow Dutch Auctions (June 1, 2001). Rutcor Research Report No. 42-2001. Available at SSRN: http://ssrn.com/abstract=358820 or http://dx.doi.org/10.2139/ssrn.358820

Contact Information

Octavian Carare
Federal Communications Commission (FCC) ( email )
445 12th Street SW
Rm. TW-B204
Washington, DC 20554
United States
Michael H. Rothkopf (Contact Author)
Rutgers University, Piscataway ( email )
Rutgers Business School and RUTCOR
Rutcor Modular Bldg, Room 121
Piscataway, NJ 08854
United States
732-445-0266 (Phone)
732-445-5472 (Fax)
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