A Study of Bidding Behavior in Voluntary-Pay Philanthropic Auctions

The authors investigate compliance behavior and revenue implications in simultaneous winner-pay and voluntary-pay auctions in charity and non-charity settings. In the voluntary-pay format, the seller asks all bidders to pay their own high bid, with voluntary payment compliance from losing bidders. The authors explore motives and boundary conditions for compliance behavior based on internal and external triggers of social norms. Despite imperfect compliance, the voluntary-pay format generates higher revenue than the winner-pay format for charity auctions. In contrast, in the non-charity setting, winner-pay auctions generate higher collected revenue. Non-paying losing bidders play an important role in this as they bid more aggressively. To characterize bidding strategy, the authors study time-to-bid, auction choice, and jump bidding and find evidence that bidders in voluntary-pay auctions more commonly use jump bidding and late entry