When does cheating on mail-in bids pay? A guide for the dishonest auctioneer

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Abstract

In English auctions an auctioneer sometimes receives (second-price) bids from bidders who cannot attend the auction. These bids are referred to as mail-in bids, left bids, or bookbids, and are commonly handled by an auctioneer's assistant. In this paper I consider auctions where there is one bid left with the auctioneer in an English auction with no reserve. The auctioneer can increase his revenue by cheating, at least partially (through phantom bids or large bidding increments), on the bookbid when the bookbidder's valuation is more likely to be the highest than the second highest among all valuations. This is true even if, in equilibrium, this cheating is perfectly anticipated. This implies that the acquisition of a good reputation is not a sufficient incentive for honest auctioneer behavior.

Original languageEnglish (US)
Pages (from-to)313-323
Number of pages11
JournalJournal of Economic Behavior and Organization
Volume40
Issue number3
DOIs
StatePublished - Nov 1 1999

Keywords

  • Auctions
  • Bookbids
  • Left-bids
  • Phantom bids

ASJC Scopus subject areas

  • Economics and Econometrics
  • Organizational Behavior and Human Resource Management

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