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Optimal sequential auctions

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  • Jofre-Bonet, Mireia
  • Pesendorfer, Martin

Abstract

Sequential sealed first-price and open descending-price procurement auctions are studied. We examine which procurement auction rule achieves the low procurement cost. We show that the answer to this policy question depends on whether the items are complements or substitutes. With substitutes, the first-price procurement auction is preferred, while with complements, the open descending-price procurement auction is preferred. We also illustrate the procurement cost minimizing auction and the auction rule preferred by the bidders. With substitutes, bidders prefer the open descending-price procurement auction, while with complements bidders prefer the first-price procurement auction.

Suggested Citation

  • Jofre-Bonet, Mireia & Pesendorfer, Martin, 2014. "Optimal sequential auctions," International Journal of Industrial Organization, Elsevier, vol. 33(C), pages 61-71.
    • Handle: RePEc:eee:indorg:v:33:y:2014:i:c:p:61-71
    DOI: 10.1016/j.ijindorg.2014.02.002
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    Cited by:

    1. Charles J. Thomas, 2010. "Information Revelation And Buyer Profits In Repeated Procurement Competition," Journal of Industrial Economics, Wiley Blackwell, vol. 58(1), pages 79-105, March.
    2. Fanqi Shi & Yiqing Xing, 2022. "Implementing optimal outcomes through sequential auctions," RAND Journal of Economics, RAND Corporation, vol. 53(4), pages 703-732, December.
    3. Saini, Viplav, 2010. "Reserve prices in a dynamic auction when bidders are capacity-constrained," Economics Letters, Elsevier, vol. 108(3), pages 303-306, September.
    4. Mochon, Pablo & Mochon, Asuncion & Saez, Yago, 2022. "Combinatorial versus sequential auctions to allocate PPP highway projects," Transport Policy, Elsevier, vol. 117(C), pages 23-39.
    5. Dennis Clerck & Erik Demeulemeester, 2016. "A sequential procurement model for a PPP project pipeline," OR Spectrum: Quantitative Approaches in Management, Springer;Gesellschaft für Operations Research e.V., vol. 38(2), pages 427-457, March.
    6. Gonzalo Cisternas & Nicolás Figueroa, 2015. "Sequential procurement auctions and their effect on investment decisions," RAND Journal of Economics, RAND Corporation, vol. 46(4), pages 824-843, October.
    7. Wittwer, Milena, 2020. "Interconnected pay-as-bid auctions," Games and Economic Behavior, Elsevier, vol. 121(C), pages 506-530.

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    More about this item

    Keywords

    Sequential auctions; Optimal auctions; Complementarities; Substitutes;
    All these keywords.

    JEL classification:

    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D47 - Microeconomics - - Market Structure, Pricing, and Design - - - Market Design
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • L00 - Industrial Organization - - General - - - General
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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