Auctions with external incentives: Experimental evidence
Paper number: 16/02
Paper date: May 2016
Paper Category: Discussion Paper
Miguel A. Fonseca, Francesco Giovannoni, Miltiadis Makris
We consider auctions where bidders have external incentives and focus on the case where their valuations in the auction are positively correlated with their productivity which matters in a second stage job market. We study how this affects bidding behavior and wages in the job market and proceed to test the model’s implication in an experiment where treatments differ according to which bids are disclosed. Our results broadly confirm the theoretical prediction that bidders tend to overbid, and their bidding behavior and wages are influenced by the disclosure rule. The data also suggests that the dispersion in worker wages is affected by the disclosure rule, suggesting the importance of reputational bidding.
Keywords: Auctions, signaling, disclosure, experiments.
JEL Classification: C92, D44, D82.