Sealed-Bid Auctions with Human Auctioneers: An Experimental Study∗

This paper studies first-price (FPA) and second-price (SPA) sealed-bid auctions with independent private values in a laboratory experiment in the presence human auctioneers (HA) who set reserve prices. When comparing bidder behavior in these auctions with near-zero reserve prices to identical auctions without HA and zero reserve prices, we find that in the presence of HA bidders bid less for a range of intermediate-to-higher valuations, especially in the FPA. This suggests that the presence of HA per se may have an effect on bidder behavior. In sessions with HA, we find that bidding in the FPA is broadly consistent with equilibrium theory, whereas bidding in the SPA is not, due to overbidding. The average reserve price set by the auctioneers is the same in both auction formats, but many reserve prices are out of range predicted by equilibrium theory. The FPA dominates the SPA in terms of revenue for the bottom third of reserve prices. The probability of sale is higher in the SPA compared to the FPA for a range of lower-to-medium reserve prices. The probability of selling to the highest valuation bidder conditional on sale exceeds 80 percent in the FPA and 92 percent in the SPA, but it is statistically different from 100 percent for majority of reserve prices, but not different between the two auction formats.