Competitive Decision Making in Dutch Auctions

Bid now or wait?

In a Dutch auction, the price falls until someone bids. Waiting can secure a lower price, but a competitor may act first. We used computerised auctions to study this trade-off in groups of three bidding with hypothetical funds.

Experiments and modelling

Rachel Mullard and I collected and analysed the data. I also prepared the figures and co-wrote the paper. The experiments varied the starting price, price-change pattern and available quantity. A preliminary extension of prospect theory treated bidding as a sequence of decisions about whether to act or wait.

Findings and limits

Higher starting prices were associated with higher winning bids. Price-change pattern and quantity volatility had little effect under the tested conditions. The model captured major qualitative patterns, providing a basis for further quantitative tests.

The findings describe controlled group decisions with hypothetical funds. They do not establish how much revenue a seller would gain in a real market.