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Time is money: The effect of clock speed on seller's revenue in Dutch auctions

Published online by Cambridge University Press:  14 March 2025

Elena Katok*
Affiliation:
Smeal College of Business, Penn State University, 465 Business Building, University Park, PA, 16802, USA
Anthony M. Kwasnica*
Affiliation:
Smeal College of Business, Penn State University, 332 Business Building, University Park, PA 16802, USA

Abstract

We study the role of timing in auctions under the premise that time is a valuable resource. When one object is for sale, Dutch and first-price sealed bid auctions are strategically equivalent in standard models, and therefore, they should yield the same revenue for the auctioneer. We study Dutch and first-price sealed bid auctions in the laboratory, with a specific emphasis on the speed of the clock in the Dutch auction. At fast clock speeds, revenue in the Dutch auction is significantly lower than it is in the sealed bid auction. When the clock is sufficiently slow, however, revenue in the Dutch auction is higher than the revenue in the sealed bid auction. We develop and test a simple model of auctions with impatient bidders that is consistent with these laboratory findings.

Type
Research Article
Copyright
Copyright © 2008 Economic Science Association

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Footnotes

Electronic supplementary material The online version of this article (http://dx.doi.org/10.1007/s10683-007-9169-x) contains supplementary material, which is available to authorized users.

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