“Does Jump-bidding Increase Sellers’ Revenue? Theory and Experiment” by Wooyoung Lim
The Hong Kong University of Science and Technology
University of Bristol
Previous papers (Avery , Daniel and Hirshleifer ) conclude that seller's revenue decreases when jump-bidding occurs, which is in sharp contrast to the fact that jump-bidding is allowed rather than forbidden by sellers in real-life auctions (e.g., Sotheby's auctions, the FCC spectrum auctions). In our study, we conduct experiments of private value auctions and find that sellers' revenue actually increases significantly when jump-bidding occurs. We provide a theory regarding jump-bidding in which the revenue in jump-bidding equilibria dominates that in the no-jump equilibrium, when bidders are risk-averse. The experimental outcomes are consistent with our theory.