Slow Dutch Auctions

Management Science, Vol. 51, No. 3, pp. 365-373

Rutcor Research Report No. 42-2001

15 Pages Posted: 20 Jan 2003 Last revised: 7 Feb 2012

See all articles by Octavian Carare

Octavian Carare

Federal Communications Commission (FCC)

Michael H. Rothkopf

Rutgers University, Piscataway

Date Written: June 1, 2001


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.

Keywords: Dutch auctions

JEL Classification: D44

Suggested Citation

Carare, Octavian and Rothkopf, Michael H., Slow Dutch Auctions (June 1, 2001). Rutcor Research Report No. 42-2001. Available at SSRN: or

Octavian Carare

Federal Communications Commission (FCC) ( email )

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Michael H. Rothkopf (Contact Author)

Rutgers University, Piscataway ( email )

Rutgers Business School and RUTCOR
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Piscataway, NJ 08854
United States
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