Doctoral Dissertation Research in Economics: Selling Shares to Many Budget Constrained Bidders

Ohio State University, The, Columbus OH

Investigators

Abstract

This doctoral dissertation research improvement grant will fund a study of the efficiency and revenue effects of share auctions. Share auctions are also sometimes called voucher auctions. In this kind of auction, every bidder pays what she bids and receives a fraction of the item equal to her bid divided by the sum of all bids. These auctions have been used to privatize publicly owned assets and have also been used for cryptocurrency crowd sales. The project will use lab experiments to compare the results of share auctions to the results of first price auctions. The results will help us understand whether or not share auction methods could be a practical alternative for use in business and by governments who seek to raise revenues. The coPI has developed a theoretical model that predicts that the share auction is dominated by second price auctions, first price auctions, and all pay auctions if bidders are not budget constrained or face only a weak constrain. With a strong budget constraint, the theory predicts that share auctions can achieve higher efficiency and revenue than that second or first price auctions, although all pay auctions still give better results. The lab experiments will test whether these predictions hold. The results will give us new understanding of bidding behavior and economic performance when share auction methods are used. The project also adds to our understanding of auctions with budget constrained bidders. This award reflects NSF's statutory mission and has been deemed worthy of support through evaluation using the Foundation's intellectual merit and broader impacts review criteria.