1ST PRICE AUCTIONS WITH ENTRY - AN EXPERIMENTAL INVESTIGATION

For an auction market that is costly to participate in, the equilibriu m market size is endogenously determined by the auction's expected pro fitability. A few recent papers have addressed bidder endogeneity and note important result differences this recognition can cause. The purp ose of this paper is to present an initial empirical investigation of a first-price private-values auction in which bidder participation req uires payment of an entry fee. The results indicate that market size i s inversely related to the size of the entry fee and agents enter the auction until the average profitability equals or is less than the ent ry fee.