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Learning by bidding

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  • Tanjim Hossain

Abstract

We analyze a dynamic second-price auction with an informed bidder and an uninformed bidder who, upon seeing a posted price, learns whether his valuation is above that price. In the essentially unique equilibrium, an informed bidder bids in the first period if her valuation is below some cutoff and bids only in the last period otherwise. An uninformed bidder bids in every period to optimally change the price unless the price is above his valuation or he is the high bidder. This model also provides a rationale behind the use of a secret reserve price in private-value settings. Copyright (c) 2008, RAND.

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Bibliographic Info

Article provided by RAND Corporation in its journal The RAND Journal of Economics.

Volume (Year): 39 (2008)
Issue (Month): 2 ()
Pages: 509-529

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Handle: RePEc:bla:randje:v:39:y:2008:i:2:p:509-529

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Cited by:
  1. Edmund Mantell, 2013. "Rational Reserve Pricing in Sequential Auctions," Atlantic Economic Journal, International Atlantic Economic Society, International Atlantic Economic Society, vol. 41(2), pages 149-159, June.
  2. Tim Grebe & Radosveta Ivanova-Stenzel & Sabine Kröger, 2009. "Buy-it-Now Prices in eBay Auctions-The Field in the Lab," Cahiers de recherche, CIRPEE 0950, CIRPEE.
  3. Sascha Füllbrunn, 2009. "A comparison of Candle Auctions and Hard Close Auctions with Common Values," FEMM Working Papers 09019, Otto-von-Guericke University Magdeburg, Faculty of Economics and Management.
  4. Jeffrey Ely & Tanjim Hossain, 2006. "Sniping and squatting in auction markets," Natural Field Experiments, The Field Experiments Website 00274, The Field Experiments Website.
  5. Bryan Lim, 2010. "The Case for Last-Second Bidding," Levine's Working Paper Archive 661465000000000343, David K. Levine.
  6. Glover, Brent & Raviv, Yaron, 2012. "Revenue non-equivalence between auctions with soft and hard closing mechanisms: New evidence from Yahoo!," Journal of Economic Behavior & Organization, Elsevier, Elsevier, vol. 81(1), pages 129-136.
  7. Pownall, Rachel A.J. & Wolk, Leonard, 2013. "Bidding behavior and experience in internet auctions," European Economic Review, Elsevier, Elsevier, vol. 61(C), pages 14-27.
  8. Philippe Jehiel & Laurent Lamy, 2011. "Absolute auctions and secret reserve prices: Why are they used?," Levine's Working Paper Archive 786969000000000316, David K. Levine.
  9. Kevin Hasker & Robin Sickles, 2010. "eBay in the Economic Literature: Analysis of an Auction Marketplace," Review of Industrial Organization, Springer, Springer, vol. 37(1), pages 3-42, August.
  10. Axel Ockenfels & David Reiley & Abdolkarim Sadrieh, 2006. "Online Auctions," NBER Working Papers 12785, National Bureau of Economic Research, Inc.

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