  We study actual bidding behavior when a new auction format gets introduced
into the marketplace. More specifically, we investigate this question using a
novel dataset on internet display advertising auctions that exploits a
staggered adoption by different publishers (sellers) of first-price auctions
(FPAs), instead of the traditional second-price auctions (SPAs). Event study
regression estimates indicate that, immediately after the auction format
change, the revenue per sold impression (price) jumped considerably for the
treated publishers relative to the control publishers, ranging from 35% to 75%
of the pre-treatment price level of the treatment group. Further, we observe
that in later auction format changes the increase in the price levels under
FPAs relative to price levels under SPAs dissipates over time, reminiscent of
the celebrated revenue equivalence theorem. We take this as evidence of
initially insufficient bid shading after the format change rather than an
immediate shift to a new Bayesian Nash equilibrium. Prices then went down as
bidders learned to shade their bids. We also show that bidders' sophistication
impacted their response to the auction format change. Our work constitutes one
of the first field studies on bidders' responses to auction format changes,
providing an important complement to theoretical model predictions. As such, it
provides valuable information to auction designers when considering the
implementation of different formats.
