BIDDERS’ CHOICE AUCTIONS: RAISING REVENUES THROUGH THE RIGHT TO CHOOSE Jacob K. Goeree CREED and University of Amsterdam Charles R. Plott California Institute of Technology John Wooders University of Arizona Abstract Sales of multiple real-estate properties are often conducted via a sequence of ascending auctions, giving the winner at each stage the right to choose one of the available lots. We show that when bidders are risk averse, such “bidders’ choice” auctions raise more revenues than standard simultaneous or sequential ascending auctions. We also report the results of laboratory experiments to investigate the effectiveness of bidders’ choice auctions vis-a-vis the simultaneous ascending auction. The revenue-superiorityof the bidders’ choice auction is corroborated by the experimental data. Finally, we compare observed bidding behavior in the experiments with theoretically predicted bids to estimate a common risk aversion parameter from the data. (JEL: D44, C72) 1. Introduction In its glossary of auction terms, the National Association of Realtors denes a bidders’ choice auction as: 1 A method of sale whereby the successful high bidder wins the right to choose a property (or properties) from a grouping of similar or like-kind properties. After the high bidder’s selection, the property is deleted from the group, and the second round of bidding commences, with the high bidder in round two choosing a property, which is then deleted from the group and so on, until all properties are sold. Acknowledgments: We are grateful to Roberto Burguet for very helpful suggestions, and to Larry Ausubel, Tim Cason, and participants at the European Economic Association Meetings in Stock- holm (August, 2003) for comments. We acknowledge nancial support from the Alfred P. Sloan Foundation, the National Science Foundation, and the Caltech Laboratory for Experimental Economics and Political Science. E-mail addresses: Goeree: jkg@fee.uva.nl; Plott: cplott@hss.caltech.edu; Wooders: jwooders@ eller.arizona.edu 1. See ^http://www.aaauctionservice.com/ glossery_les/glossery.htm &. Journal of the European Economic Association April–May 2004 2(2–3):504 –515 © 2004 by the European Economic Association