Sequential auctions with randomly arriving buyers
AbstractWe analyze a dynamic market in which buyers compete in a sequence of private-value auctions for differentiated goods. New buyers and new objects may arrive at random times. Since objects are imperfect substitutes, buyers' values are not persistent. Instead, each buyer's private value for a new object is a new independent draw from the same distribution. We consider the use of second-price auctions for selling these objects, and show that there exists a unique symmetric Markov equilibrium in this market. In equilibrium, buyers shade their bids down by their continuation value, which is the (endogenous) option value of participating in future auctions. We characterize this option value and show that it depends not only on the number of buyers currently present on the market and the distribution of their values, but also on anticipated market dynamics.
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Bibliographic InfoArticle provided by Elsevier in its journal Games and Economic Behavior.
Volume (Year): 73 (2011)
Issue (Month): 1 (September)
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Web page: http://www.elsevier.com/locate/inca/622836
Dynamic markets Sequential auctions Endogenous options Random arrivals Stochastic equivalence Symmetric Markov equilibrium;
Other versions of this item:
- D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
- D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
- C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
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