Dutch Auctions Outperform First-Price, Boosting Revenue with Optimistic Bidders
The researchers looked at how people bid in different types of auctions when they have strong feelings about losing. They found that in Dutch auctions, where the price starts high and goes down, bidders get more hopeful as the auction goes on and bid more aggressively. This leads to more money being made compared to first-price auctions, where the highest bidder wins. In fact, Dutch auctions make the most money out of all the usual auction types. This suggests that in auctions where people's feelings about losing change over time, auctions where the price changes might work better than ones with a fixed price.