Information transparency in business-to-business auction markets: The role of winner identity disclosure
Management Science , Volume 65 - Issue 9 p. 4261- 4279
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.
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|Organisation||Rotterdam School of Management (RSM), Erasmus University|
Lu, Y. (Yixin), Gupta, A, Ketter, W, & van Heck, H.W.G.M. (2019). Information transparency in business-to-business auction markets: The role of winner identity disclosure. Management Science, 65(9), 4261–4279. doi:10.1287/mnsc.2018.3143