Double Round Auctions

This article analyzes auctions that can feature two bidding rounds for the sale of a single good. In the first round the seller, after analyzing the received bids, may elect to have k bidders rebid. The highest bidder in the second round receives the asset at the highest bid price. We use a sample of 67 properties that sold through this auction process. The 40 hotels in this sample are matched to a control group of 165 hotel properties that were sold in the conventional manner in order to develop a hedonic model for sale prices. From this model, we find that the double round auction mechanism increases the seller’s revenue significantly: specifically, we estimate that the expected value of a double round auction sale (in either round) is 15.4% larger than if the property were sold using traditional methods. We further find (controlling for property characteristics) that the average bid increases by 3.7% from the first to the second round and that the expected value of a second round bid is 8.5% larger than the expected value of a first round bid.