Pay-to-Bid Auctions

31 Pages Posted: 1 Feb 2010

See all articles by Brennan C Platt

Brennan C Platt

Brigham Young University - Department of Economics

Joseph Price

Brigham Young University

Henry Tappen

affiliation not provided to SSRN

Date Written: January 2010

Abstract

We analyze a new auction format in which bidders pay a fee each time they increase the auction price. Bidding fees are the primary source of revenue for the seller, but produce the same expected revenue as standard auctions. Our model predicts a particular distribution of ending prices, which we test against observed auction data. Our model fits the data well for over three-fourths of routinely auctioned items. The notable exceptions are video game paraphernalia, which show more aggressive bidding and higher expected revenue. By incorporating mild risk-loving preferences in the model, we explain nearly all of the auctions.

Suggested Citation

Platt, Brennan C and Price, Joseph and Tappen, Henry, Pay-to-Bid Auctions (January 2010). NBER Working Paper No. w15695, Available at SSRN: https://ssrn.com/abstract=1544746

Brennan C Platt (Contact Author)

Brigham Young University - Department of Economics ( email )

130 Faculty Office Bldg.
Provo, UT 84602-2363
United States
801-422-8904 (Phone)

HOME PAGE: http://econ.byu.edu

Joseph Price

Brigham Young University ( email )

130 FOB
Provo, UT 84604
United States

HOME PAGE: http://https://economics.byu.edu/directory/joseph-p-price

Henry Tappen

affiliation not provided to SSRN ( email )

No Address Available

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