A form of all-pay auction in which every bidder pays his or bid to the auctioneer, and the winner is selected randomly with probability proportional to one's bid.
This is equivalent to a raffle, and is often implemented by having bidders purchase lottery tickets at a fixed price per ticket.
The winner is selected randomly from among all tickets purchased. Chinese auctions are often used to model political elections or patent races, in which the chance of winning is seen as proportional to the amount spent.
created: 24 January 2007
HOW TO CITE THIS ENTRY
- To learn more:
- See news articles on auctions.
- Try a winner's curse applet on the applets page.
- Read about auction experiments at e-Economics.net.
- Learn about auctions by reading lecture notes.