Slow Dutch Auctions

Octavian Carare
Department of Economics
Rutgers University
Box 5062
New Brunswick, NJ 08903

and
Michael Rothkopf
RUTCOR and MSIS Department
Rutgers University
640 Bartholomew Road
Piscataway, NJ 08854-8003

June, 2001

Abstract
Theorists have long believed that Dutch auctions are strategically equivalent 
to standard sealed bidding.  However, recently in controlled experiments with 
actual Dutch and sealed bid Internet auctions of collectables, the Dutch 
auctions produced significantly more revenue.  We believe that this happened, 
in part, because the Internet Dutch auctions are a slow process in which 
bidders incur incremental transaction costs if they delay bidding.  
This paper presents models of slow Dutch auctions that include these costs 
and explain this belief.