Revenue non-equivalence between the English and the second-price auctions: experimental evidence

Abstract

Under second-price sealed bid auctions, when bidders have independent private valuations of a risky object, submitting one’s valuation is no longer dominant for non-expected utility bidders. This yields a breakdown in revenue equivalence between English auctions and second-price auctions for non-expected utility bidders. In an experimental auction market selling a single risky object, we find that an English-auction yields higher seller revenue than the corresponding second-price auction. Further, the direction of revenue difference is supported by Nash equilibrium bidding behavior of betweenness-conforming non-expected utility bidders, under the additional hypothesis of bidders displaying a weak form of Allais type behavior.