Auction Format Matters: Evidenceon Bidding Behavior and Seller Revenue

Author/Editor:

Robert A Feldman ; Vincent Reinhart

Publication Date:

May 1, 1995

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

This paper evaluates the importance of auction format on bidding behavior and seller revenue, focusing on differences in performance under uniform-price and discriminatory-price formats. The analysis is based on a standard benchmark model from which empirically-testable hypotheses are derived on the optimal amount of bid shading that generates revenue equivalence between the two formats. Applying this model to data from the IMF gold auctions run in 1976-80, we find evidence of statistically significant shading in excess of the theoretically-derived optimum under the discriminatory format. This evidence suggests greater seller revenue under the uniform-price format.

Series:

Working Paper No. 1995/047

Subject:

Commodities Commodity markets Financial markets Gold Gold prices Prices

Notes:

Also published in Staff Papers, Vol. 43, No. 2, June 1996.

English

Publication Date:

May 1, 1995

ISBN/ISSN:

9781451846607/1018-5941

Stock No:

WPIEA0471995

Pages:

30

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