An "Alternating Recognition" Model of English Auctions
AbstractWe present an alternative abstraction of an English (oral ascending) auction to the standard, in Milgrom and Weber (1982), that accords more closely with practices in some auction markets. In particular, the assumptions that exits are irrevocable and necessarily public are dropped, making endogenous the decision to compete silently and privately, or openly. In the model, the price rises in a stylization of an auctioneer alternately recognizing two bidders who affirm willingness to pay the current price. The auctioneer pays attention to other bidders only when a recognized bidder exits. Such exits may be temporary, although we construct an equilibrium in which there is no benefit to exit and reentry. The number of public exits is stochastic; frequently a losing "bidder" will remain silent, giving no indication of his willingness to pay, and hence yielding no useful inference about his private information. Thus, the source of the expected revenue advantage of English auctions over second-price auctions is only stochastically available. Moreover, when public exits are incomplete, the ordinal rank of the bidder whose private information can be inferred is unknown, making that information less valuable. Consequently, the simpler formula for expected revenue in second-price auctions may be the preferred approximation for English auctions.
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Bibliographic InfoArticle provided by INFORMS in its journal Management Science.
Volume (Year): 46 (2000)
Issue (Month): 1 (January)
Competitive Bidding; Oral Auctions; Auction Theory; Information Disclosure in Auctions;
Other versions of this item:
- Harstad, Ronald M. & Michael H. Rothkopf, 1995. "An "Alternating Recognition" Model of English Auctions," Discussion Paper Serie B 348, University of Bonn, Germany.
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- Ronald M. Harstad, 2007.
"Does a Seller Really Want Another Bidder?,"
0711, Department of Economics, University of Missouri.
- Ronald M Harstad, 2011. "Endogenous Competition Alters the Structure of Optimal Auctions," ISER Discussion Paper 0816, Institute of Social and Economic Research, Osaka University.
- Olivier Compte & Philippe Jehiel, 2007.
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- Olivier Compte & Philippe Jehiel, 2005. "Auctions and Information acquisition: Sealed-bid or Dynamic Formats?," Levine's Bibliography 784828000000000495, UCLA Department of Economics.
- Ronald M. Harstad, 2005.
"Rational Participation Revolutionizes Auction Theory,"
0504, Department of Economics, University of Missouri.
- Ronald M. Harstad, 2005. "Rational Participation Revolutionizes Auction Theory," Working Papers 0518, Department of Economics, University of Missouri.
- Yin, Pai-Ling, 2007. "Empirical tests of information aggregation," International Journal of Industrial Organization, Elsevier, vol. 25(6), pages 1179-1189, December.
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