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We compare allocation rules in uniform price divisible-good auctions. Theoretically, a “standard allocation rule (STANDARD)” and a “uniform allocation rule (UNIFORM)” admit different types of low-price equilibria, which are eliminated by a “hybrid allocation rule (HYBRID).” We use a controlled laboratory experiment to compare the empirical performances of these allocation rules.

We conduct three-bidder uniform price divisible-good auctions varying the different allocation rules (standard, uniform, or hybrid) and whether or not explicit communication between bidders is allowed. For the case where explicit communication is allowed we also study six-bidder auctions.

We find that prices are similar across allocation rules. Under all three allocation rules, prices are competitive when bidders cannot explicitly communicate. With explicit communication, prices are collusive, and we observe collusive prices even when collusive agreements are broken. Collusive agreements are particularly fragile when the gain from a unilateral deviation is larger, and an implication of this is that collusive agreements are more robust under STANDARD.

We do not find conclusive evidence of differences in performance among allocation rules. However, there is suggestive evidence that STANDARD may be more vulnerable to collusion.

Divisible-good uniform price auctions are used in financial markets, but it is not possible to use naturally occurring data to test how alternatives to the standard format would perform. Using laboratory methods we provide an initial test of alternative allocation rules.

To transform donations “in kind” into cash, charities of all sizes use auctions and raffles. Despite this, neither the theory nor the practice of efficient fund-raising – and, in particular, charity auctions – has received sufficient attention from economists, especially the fact that participation in fund-raisers is endogenous. We describe, in detail, the design and implementation of an experiment to examine 15 charity auction mechanisms. While some of the mechanisms have already received attention from both theorists and empiricists, ours is the first comprehensive examination of all existing mechanisms and the first to explore the potential of a few new formats. Our analysis focuses on participation differences among the formats and how theory and supplemental survey data can help explain some of these differences.

This paper addresses social interatcion and the formation of value beliefs in markets. It empirically examines value construction by analyzing rebidding behavior in online auctions, wherein individuals reassess the maximum price they would pay for a given product. Statistical analyses of more than 10,000 auctions containing more than 55,000 individual bids on the auction website eBay suggest that rebidding is positively associated with a lack of auction-internal price information and bidder inexperience. Analyses also suggest that engaging in rebidding is positively associated with an individual winning an auction. This work, therefore, helps to provide a deeper understanding about valuation, price formation, and the organization of markets. This work contributes to domains of research related to the construction of value and the emergence, evaluation, and legitimization of new products, services, and ideas.

This chapter develops a structural framework for the analysis of scoring procurement auctions where bidder’s quality and bid are taken into account. With exogenous quality, the authors characterize the optimal mechanism whether the buyer is private or public and show that the optimal scoring rule need not be linear in the bid. The model primitives include the buyer benefit function, the bidders’ cost inefficiencies distribution and cost function, and potentially the cost of public funds. We show that the model primitives are nonparametrically identified under mild functional assumptions from the buyer’s choice, firms’ bids and qualities. The authors then develop a multistep kernel-based procedure to estimate the model primitives and provide their convergence rates. Our identification and estimation results are general as they apply to other scoring rules including quasi-linear ones.

Following the cultural distance and the acquisition cultural risk propositions, I study the impact of organizational culture differences among merging companies on their short-term stock performance following merger announcement. I assume that on announcement the market cannot access companies’ organizational culture detailed information, that it focuses on its exposure risk, and that it is inefficient. Using public information available prior to merger announcement, I construct proxies of organizational culture differences among the merging companies and a proxy of a factor mitigating the acquisition cultural risk. Analyzing 6,742 merger announcements released by publicly traded U.S. companies between 1984 and 2005, I show that following merger announcement the market prices a factor mitigating the acquisition cultural risk rather than the magnitude of specific organizational culture differences. Moreover, the market prices stocks of companies involved in high-risk mergers lower than of companies in low-risk mergers. Results are robust to size and period controls.

Traditional auction theory assumes that bidders possess values defined solely on the auctioned object. There may, however, be cases in which bidders possess preferences over the revenue achieved by the auctioneer. We present here a comprehensive framework of price-preference valuations, unifying several phenomena ranging from preference for charitable giving to shill bidding. We compare expected efficiency and revenue of first- and second-price auctions for some specific cases of key interest. We also incorporate heterogeneous bidder preferences and examine the effects of mis-specified beliefs and show that both are crucial for understanding these situations.

We present results of several experiments that deal with endogenous entry in auctions and auction valuation. One observation that is constant across all the experiments we report is that laboratory subjects have a difficult time evaluating potential gains from auctions. Even after they are given some experience with particular auctions, the uncertainty inherent in the auctions (the probability of winning as well as the potential gains from winning) makes it difficult for subjects to compare different auction mechanisms. This highlights the need for new experimental procedures to be used for testing theories that involve endogenous auction entry in the laboratory.

Russia's size – both in terms of population and geography, spanning 11 time zones, 89 oblasts (states or regions) and autonomous republics and its privatization program, encompassing some 100,000 small-scale enterprises, 25,000 medium to large firms, and 300 or so of its largest firms, made its privatization program the largest sale/transfer of assets conducted among the transition economies, with the possible exception of China. Comparisons by many of the program's critics, and there are many, to Poland, Hungary, or the Czech republic are invidious, especially the latter two countries whose populations are similar to just that of greater Moscow.

Some firms choose not to use an investment bank advisor in mergers and acquisitions (M&A) transactions. We test whether this decision affects the merger announcement period returns. We compare the abnormal returns from a sample of 179 in-house acquisitions (in which either the acquirer or the target firm does not hire an investment bank advisor) to those of a matched sample of acquisitions (in which all firms hire an investment bank advisor). We find that not employing a financial advisor has no significant effect on the abnormal returns of acquiring firms but does reduce the abnormal returns of target firms. This relation holds even after controlling for various firm and merger characteristics.

We report an experiment conducted to gain insight into factors that may affect revenues in English auctions and lotteries, two commonly used charity fund-raising formats. In particular, we examine how changes in the marginal per capita return (MPCR) from the public component of bidding, and how changes in the distribution of values affect the revenue properties of each format. Although we observe some predicted comparative static effects, the dominant result is that lottery revenues uniformly exceed English auction revenues. The similarity of lottery and English auction bids across sales formats appears to drive the excess lottery revenues.