Synergies are a reason to prefer first-price auctions!

Abstract

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An improved sequential auction with complementarity for pricing the construction land quota

“…Second, the equilibrium bidding prices of the quota, or the item in the first stage, rises with the increase in the parameter of land value depreciation R . This finding is consistent with the conclusions drawn by Wang et al [ 36 ] and Leufkens and Peeters [ 45 ]. The results show that R positively affects the quota price.…”

“…First, according to Menezes et al [ 40 ] and Leufkens and Peeters [ 45 ], bidders who fail to obtain the quota during the first stage reduce their valuation of the construction land by R times. They also reduce their expected payoff during the second auction.…”

An Experimental Comparison of Sequential First- and Second-Price Auctions with Synergies

“…They find that bidders' expected total payoffs from the auction sequence decreases in the synergy factor and that there is a serious probability of making losses. Leufkens and Peeters (2007) compare sequential first-and second-price auctions and conclude that although expected revenue and efficiency are higher in second-price auctions, first-price auctions may be preferred based on a less severe exposure problem.…”

Sequential Auctions with Capacity Constraints: An Experimental Investigation

“…Then, of the 80 participants, 41 subjects (51%) are LL, 10 subjects (13%) are EE, 15 subjects (19%) are LE, and 14 subjects (17%) are EL. 13 …”

“…To the best of our knowledge, there is only one existing set of sequential auction experiments where valuations for a good are drawn after the allocation of the previous one [13,14] are. The authors study a two-good setting with synergies, where the agent who obtains the first good has an increased valuation for the second good.…”