Goodwill Can Hurt: A theoretical and experimental investigation of return policies in auctions

• 成果类型: Article
• 署名作者: Cadsby, C. Bram; Du, Ninghua; Wang, Ruqu; Zhang, Jun
• 署名单位: University of Guelph; Shanghai University of Finance & Economics; Shanghai University of Finance & Economics; Queens University - Canada; Zhejiang University; University of Technology Sydney
• 刊物名称: GAMES AND ECONOMIC BEHAVIOR
• ISSN/ISSBN: 0899-8256
• DOI: 10.1016/j.geb.2016.08.002
• 发表日期: 2016
• 页码: 224-238
• 关键词: Auctions; Return policies; Common value; experiment

摘要

Will generous return policies in auctions benefit bidders? We investigate this issue using second-price common-value auctions. Theoretically, we find that the symmetric bidding equilibrium is unique unless returns are free, and when returns are free there exist multiple equilibria with different implications for sellers. Moreover, more generous return policies mitigate the winner's curse, but also push the bids higher, thus hurting bidders by eroding their surplus. In the experiment, bids increase and bidders' earnings decrease with more generous return policies as predicted. With free returns, many bidders bid above the highest possible value, subsequently returning the item regardless of value. Though consistent with equilibrium behavior, this is not optimal for sellers. (C) 2016 Elsevier Inc. All rights reserved.