Auctions with external incentives: experimental evidence

Abstract

AbstractWe consider auctions where bidders’ valuations are positively correlated with their productivity in a second-stage aftermarket. We test in the lab whether bidders recognize the opportunity to signal their productivity through their bidding and, conditional on them doing so, whether disclosing different information about the auction outcomes affects their signaling behavior. Our results confirm that bidders recognize the signaling opportunities they face and also react to differences in the way their bidding behavior is disclosed, although not always in a way that is consistent with theoretical predictions.