Outside options: Another reason to choose the first-price auction

摘要

In this paper we study equilibrium- and experimental bidding behaviour in ?rst-price and second price auctions with outside options. We ?nd that bidders do respond to outside options and to variations of common knowledge about competitors’ outside options. However, overbidding in ?rst-price auctions is signi?cantly higher with outside options than without. First-price auctions yield more revenue than second-price auctions. This revenue-premium is signi?cantly higher with outside options. In second-price auctions the introduction of outside options has only a small e?ect.