Charity Auctions
31 Pages Posted: 28 Aug 2002
Date Written: August 2002
Abstract
We present a model of charity auctions in which all bidders receive a benefit from the host charity raising revenue. Bidding behavior reflects two conflicting incentives: Bids may be inflated because of private benefits from charitable giving, or bids could be depressed by the public goods nature of auction revenue. We study first- and second-price auctions and all-pay auctions. Revenue equivalence is unbalanced whenever a bidder benefits from the charity collecting another bidder's money. All-pay and second-price auctions have higher expected revenue than first-price auctions. The revenue ranking of all-pay and second-price auctions depends on parameter values, but as the number of bidders becomes large the all-pay auction is more lucrative than either single-price format.
Keywords: auctions, revenue equivalence, public goods, charitable giving
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