Abstract
One of the central issues in auction design is how much information should be disclosed to bidders. In this paper, we examine bidder’s identity disclosure in sequential business-to-business (B2B) auctions. Specifically, we compare two information disclosure policies, one that publicly discloses winners’ identities (the status quo) and an alternative policy that conceals winners’ identities. Using a large-scale field experiment in the Dutch flower auction market, we find that concealing winners’ identities can significantly increase the average winning price and thereby raise the seller’s revenue. We further explore the underlying mechanism that drives the observed effect. The empirical analysis of bidding behavior in these auctions suggests that bidders tend to imitate some of their competitors who have won in previous rounds of auctions and shade their bids accordingly. Concealing winners’ identities can disrupt such imitation heuristic, which in turn mitigates the price-declining trend in sequential rounds. Our findings have important implications for the design of information disclosure policies in B2B auction markets.
| Original language | English (US) |
|---|---|
| Pages (from-to) | 4261-4279 |
| Number of pages | 19 |
| Journal | Management Science |
| Volume | 65 |
| Issue number | 9 |
| DOIs | |
| State | Published - Jan 1 2019 |
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Keywords
- Auction design
- Bidding heuristics
- Field experiment
- Identity disclosure
- Information transparency
- Sequential auctions
- Tacit collusion
Cite this
Information transparency in business-to-business auction markets : The role of winner identity disclosure. / Lu, Yixin; Gupta, Alok; Ketter, Wolfgang; Van Heck, Eric.
In: Management Science, Vol. 65, No. 9, 01.01.2019, p. 4261-4279.Research output: Contribution to journal › Article
}
TY - JOUR
T1 - Information transparency in business-to-business auction markets
T2 - The role of winner identity disclosure
AU - Lu, Yixin
AU - Gupta, Alok
AU - Ketter, Wolfgang
AU - Van Heck, Eric
PY - 2019/1/1
Y1 - 2019/1/1
N2 - One of the central issues in auction design is how much information should be disclosed to bidders. In this paper, we examine bidder’s identity disclosure in sequential business-to-business (B2B) auctions. Specifically, we compare two information disclosure policies, one that publicly discloses winners’ identities (the status quo) and an alternative policy that conceals winners’ identities. Using a large-scale field experiment in the Dutch flower auction market, we find that concealing winners’ identities can significantly increase the average winning price and thereby raise the seller’s revenue. We further explore the underlying mechanism that drives the observed effect. The empirical analysis of bidding behavior in these auctions suggests that bidders tend to imitate some of their competitors who have won in previous rounds of auctions and shade their bids accordingly. Concealing winners’ identities can disrupt such imitation heuristic, which in turn mitigates the price-declining trend in sequential rounds. Our findings have important implications for the design of information disclosure policies in B2B auction markets.
AB - One of the central issues in auction design is how much information should be disclosed to bidders. In this paper, we examine bidder’s identity disclosure in sequential business-to-business (B2B) auctions. Specifically, we compare two information disclosure policies, one that publicly discloses winners’ identities (the status quo) and an alternative policy that conceals winners’ identities. Using a large-scale field experiment in the Dutch flower auction market, we find that concealing winners’ identities can significantly increase the average winning price and thereby raise the seller’s revenue. We further explore the underlying mechanism that drives the observed effect. The empirical analysis of bidding behavior in these auctions suggests that bidders tend to imitate some of their competitors who have won in previous rounds of auctions and shade their bids accordingly. Concealing winners’ identities can disrupt such imitation heuristic, which in turn mitigates the price-declining trend in sequential rounds. Our findings have important implications for the design of information disclosure policies in B2B auction markets.
KW - Auction design
KW - Bidding heuristics
KW - Field experiment
KW - Identity disclosure
KW - Information transparency
KW - Sequential auctions
KW - Tacit collusion
UR - http://www.scopus.com/inward/record.url?scp=85072309051&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=85072309051&partnerID=8YFLogxK
U2 - 10.1287/mnsc.2018.3143
DO - 10.1287/mnsc.2018.3143
M3 - Article
AN - SCOPUS:85072309051
VL - 65
SP - 4261
EP - 4279
JO - Management Science
JF - Management Science
SN - 0025-1909
IS - 9
ER -