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Gambling By Auctions

Yaron Raviv

Claremont Colleges - Robert Day School of Economics and Finance

Gabor Virag

Rotman School of Management

April 17, 2007

We provide theoretical and empirical analysis of a selling mechanism used by an Internet web-site that combines important features of auctions and gambling. This is the first analysis of such a selling mechanism, which provides insights into how the two kinds of behavior might be related in real life. The winner of the object is the bidder with the highest bid not submitted by any other bidder. In the equilibrium of our game theoretical model, each bid yields the same probability of winning. Bidders are more likely to submit higher bids, and the bid distribution does not depend on the value of the object or the highest bid allowed if one controls for the number of bidders. These key theoretical predictions are confirmed by the data.

Number of Pages in PDF File: 30

Keywords: auctions, lottery, charity

JEL Classification: D44, C72, C12

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Date posted: June 1, 2006  

Suggested Citation

Raviv, Yaron and Virag, Gabor, Gambling By Auctions (April 17, 2007). Available at SSRN: https://ssrn.com/abstract=905606 or http://dx.doi.org/10.2139/ssrn.905606

Contact Information

Yaron Raviv (Contact Author)
Claremont Colleges - Robert Day School of Economics and Finance ( email )
500 E. Ninth St.
Claremont, CA 91711-6420
United States
909-607-7305 (Phone)

Gabor Virag
Rotman School of Management ( email )
Department of Statistical Sciences
Toronto, Ontario M5S 3G8
416-978-4423 (Phone)
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