Registration for the lecture: https://www.webeas.org/.

The next session of the Workshop of Experimental and Behavioral Economics of the Americas (WEBEAS) will be held by Axel Ockenfels. He will present his work titled "Why is the soft reserve auction so popular?".

Abstract: 
A soft reserve auction asks bidders to accept an opening price to participate in an ascending auction and allows alternative bids below the opening price if the opening is unacceptable. If no bidder accepts the opening price, the alternative bids are considered with first-price auction rules. Soft reserves are commonly used in practice, yet under standard auction theory they are irrelevant to the auction outcome. Employing a private value framework, we show that if bidders feel regret when they lose at an affordable price, adding a soft reserve to the first-price auction increases revenue and does not harm efficiency, and adding a soft reserve to the first-price auction with an optimal hard reserve increases revenue and efficiency. Initial laboratory experiments support the model (although COVID has so far prevented us from collecting all data). Moreover, many bidders accept any profitable opening price, which is predicted neither by standard theory nor by our simple model of regret.