Istanbul Flower Auction: The Need for Speed

Abstract

We examine a unique auction format used in the Istanbul flower market, which could transform into either Dutch or English auction depending on bidders' bidding behaviors. By introducing a time cost that reduces the value of a perishable good as time passes, we explore how this hybrid auction format accommodates the desire for speed via an adaptive starting price. We show that the Istanbul Flower Auction outperforms both the Dutch and English auctions in terms of the auctioneer's utility. With numerical analysis, we also illustrate the Istanbul Flower Auction's superiority in terms of social welfare and auction duration. Our results highlight the critical role of auction design in improving welfare when the duration of the auction process plays a role.