How to Boost Revenues in First-Price Auctions? The Magic of Disclosing only Winning Bids from past Auctions

We present an experiment to evaluate revenue implications of two disclosure policies available to a long-run auctioneer: disclosure of all bids from past auctions and disclosure of winning bids only. Using a first-price auction with two bidders, we find that disclosing the winning bids leads to higher bids and revenues in the long run. We propose to explain this finding by allowing a share of bidders to be naive in that, when presented with historical winning bids, they mistakenly best-respond to that distribution, failing to realize that winning bids are not representative of all bids. We also develop a method to estimate the fraction of naive bidders in a between-subject design and to relate it to the degree of bidders' risk aversion. Our findings challenge the predictive power of the Bayesian Nash equilibrium based on full bidder rationality, and they underline the selection of historical price information as a key market design choice.