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Sequential auctions with randomly arriving buyers

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  • Said, Maher

Abstract

We 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 Info

Article provided by Elsevier in its journal Games and Economic Behavior.

Volume (Year): 73 (2011)
Issue (Month): 1 (September)
Pages: 236-243

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Handle: RePEc:eee:gamebe:v:73:y:2011:i:1:p:236-243

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Web page: http://www.elsevier.com/locate/inca/622836

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Keywords: Dynamic markets Sequential auctions Endogenous options Random arrivals Stochastic equivalence Symmetric Markov equilibrium;

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References

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  1. Mireia Jofre-Bonet & Martin Pesendorfer, 2003. "Estimation of a Dynamic Auction Game," Econometrica, Econometric Society, vol. 71(5), pages 1443-1489, 09.
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  7. Jehiel, Phillipe & Moldovanu, Benny, 1997. "Auctions with Downstream Interaction among Buyers," Sonderforschungsbereich 504 Publications 97-06, Sonderforschungsbereich 504, Universit├Ąt Mannheim;Sonderforschungsbereich 504, University of Mannheim.
  8. Kochar, Subhash C., 1999. "On stochastic orderings between distributions and their sample spacings," Statistics & Probability Letters, Elsevier, vol. 42(4), pages 345-352, May.
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  10. Taylor, Curtis R, 1995. "The Long Side of the Market and the Short End of the Stick: Bargaining Power and Price Formation in Buyers', Sellers', and Balanced Markets," The Quarterly Journal of Economics, MIT Press, vol. 110(3), pages 837-55, August.
  11. Satterthwaite, Mark & Shneyerov, Artyom, 2008. "Convergence to perfect competition of a dynamic matching and bargaining market with two-sided incomplete information and exogenous exit rate," Games and Economic Behavior, Elsevier, vol. 63(2), pages 435-467, July.
  12. Wolinsky, Asher, 1988. "Dynamic Markets with Competitive Bidding," Review of Economic Studies, Wiley Blackwell, vol. 55(1), pages 71-84, January.
  13. Katharina Sailer, 2006. "Searching the eBay Marketplace," CESifo Working Paper Series 1848, CESifo Group Munich.
  14. Said, Maher, 2008. "Information Revelation and Random Entry in Sequential Ascending Auctions," MPRA Paper 7160, University Library of Munich, Germany.
  15. Satterthwaite, Mark & Shneyerov, Art, 2004. "Dynamic Matching,Two-sided Incomplete Information, and Participation Costs: Existence and Convergence to Perfect Competition," Microeconomics.ca working papers shneyerov-04-12-17-02-54-, Vancouver School of Economics, revised 17 Dec 2004.
  16. Roman Inderst, 2008. "Dynamic Bilateral Bargaining under Private Information with a Sequence of Potential Buyers," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 11(1), pages 220-236, January.
  17. Haile, Philip A., 2000. "Partial Pooling at the Reserve Price in Auctions with Resale Opportunities," Games and Economic Behavior, Elsevier, vol. 33(2), pages 231-248, November.
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Cited by:
  1. Pownall, Rachel A.J. & Wolk, Leonard, 2013. "Bidding behavior and experience in internet auctions," European Economic Review, Elsevier, vol. 61(C), pages 14-27.
  2. Bryan Lim, 2010. "The Case for Last-Second Bidding," Levine's Working Paper Archive 661465000000000343, David K. Levine.

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