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BIBLIOGRAPHY 233 ' .A fifth-pnce. sealed-bid auction is where the four highest bidders purchase the good they bid on at the fifth highest price. This auction has the same demand revealing properties as the second-price, sealed-bid auction. '• Implicitly, the bidder increases her probabilitv-of being the highest bidder by increasing her bid. but this does not increase her gains (utility) compared to bidding her true valuation. The assumption that relates to probability structures in the benchmark model of assumptions is used to prove revenue equivalence among the four auctions. TTiis assumption is not necessary when establishing the dominant strategy of the second-price auction. '' Wealth effects are when participants change their bids because they won an earlier trial (Fox et al. 19951. See Davis and Holt (1993) for a discussion of wealth effects in e.xperimental markets. Inefficiency in this context implies that the bidder with the highest valuation does not obtain the item. '• Inertia is the argument that the second-price auction is not used because bidders have become accustomed to other auction methods. '' The surplus that goes to the bidder is the difTerence between the highest bid and the second highest bid. In a \ ickrey auction, this surplus goes fiilly to the bidder. ' Matthews assumes that in the standard first-price and second-price auctions that the bidders do not know hou manj-bidders there are m the auction. In the second-price auction it does not matter how many bidders there are from the point of view of the optimal strategy to use when bidding (1996). But. it will matter to the bidders in the tlrst-price auction because they shave there bid from their true value based on the number of bidders in the auction. •' it should be noted that for the case of a product with no environmental attributes, v,,; = v,,. This is because v,j and v,3 are equal to zero when the product has no environmental attributes.

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