Comparative study of one-bid versus two-bid auctions

The paper focuses on a comparative investigation of the standard one-bid first-price auction and a corresponding two-bid auction where each buyer may place two bids: a high-bid and a low one and the winner pays his low-bid if this was higher than all other bids. We characterize the equilibria of the two mechanisms and prove some results on the ranking of revenues for the symmetric case. We show that subjects in an experiment prefer the two-bid over the one-bid auction when given the possibility of choosing between the two and compare the observed behavior to the theoretical predictions. (C) 2003 Published by Elsevier B.V.