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Predatory Bidding in Sequential Auctions

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  • von der Fehr, Nils-Henrik Morch

Abstract

The work presented in this paper suggests that participation costs may have important, and perhaps surprising, effects on the types of equilibria that can exist in sequential auction models. It is shown that when two units of an item are auctioned in two consecutive English auctions and buyers' valuations are independently distributed and private information, prices will typically decline for later units if (some or all) buyers find participation in an auction costly. It is noted that such a price path is consistent with the so-called price decline anomaly. Copyright 1994 by Royal Economic Society.

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Bibliographic Info

Article provided by Oxford University Press in its journal Oxford Economic Papers.

Volume (Year): 46 (1994)
Issue (Month): 3 (July)
Pages: 345-56

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Handle: RePEc:oup:oxecpp:v:46:y:1994:i:3:p:345-56

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Cited by:
  1. Branco, Fernando, 1997. "Sequential auctions with synergies: An example," Economics Letters, Elsevier, Elsevier, vol. 54(2), pages 159-163, February.
  2. Berg, G. van den & Ours, J.C. van & Pradhan, M.P., 1999. "Declining Prices in the Sequential Dutch Flower Auction of Roses," Discussion Paper, Tilburg University, Center for Economic Research 1999-52, Tilburg University, Center for Economic Research.
  3. Gerard Marty & Raphaele Preget, 2007. "A Socio-economic Analysis of French Public Timber Sales," Working Papers - Cahiers du LEF, Laboratoire d'Economie Forestiere, AgroParisTech-INRA 2007-03, Laboratoire d'Economie Forestiere, AgroParisTech-INRA.
  4. Zulehner, Christine, 2009. "Bidding behavior in sequential cattle auctions," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 27(1), pages 33-42, January.
  5. Owen R. Phillips & Dale J. Menkhaus & Kalyn T. Coatney, 2003. "Collusive Practices in Repeated English Auctions: Experimental Evidence on Bidding Rings," American Economic Review, American Economic Association, American Economic Association, vol. 93(3), pages 965-979, June.
  6. Archishman Chakraborty & Nandini Gupta & Rick Harbaugh, 2000. "First Impressions in a Sequential Auction," Econometric Society World Congress 2000 Contributed Papers, Econometric Society 1705, Econometric Society.
  7. J. Reiß & Jens Schöndube, 2010. "First-price equilibrium and revenue equivalence in a sequential procurement auction model," Economic Theory, Springer, Springer, vol. 43(1), pages 99-141, April.
  8. Menezes, Flavio Marques & Engelbrecht-Wiggans, Richard, 2000. "Why do bidders drop out from a sequential auction," Economics Working Papers (Ensaios Economicos da EPGE) 364, FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
  9. Katehakis, Michael N. & Puranam, Kartikeya S., 2012. "On bidding for a fixed number of items in a sequence of auctions," European Journal of Operational Research, Elsevier, Elsevier, vol. 222(1), pages 76-84.
  10. L. Picci & A. E. Scorcu, 1999. "Price Dynamics in sequential auctions. New evidence using art auction data," Working Papers, Dipartimento Scienze Economiche, Universita' di Bologna 352, Dipartimento Scienze Economiche, Universita' di Bologna.
  11. 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.
  12. Rasim Ozcan, 2004. "Sequential Auctions with Endogenously Determined Reserve Prices," Boston College Working Papers in Economics, Boston College Department of Economics 592, Boston College Department of Economics.
  13. Gale, Ian L. & Stegeman, Mark, 2001. "Sequential Auctions of Endogenously Valued Objects," Games and Economic Behavior, Elsevier, Elsevier, vol. 36(1), pages 74-103, July.
  14. Jean-Jacques Laffont, 1998. "Théorie des jeux et économie empirique : le cas des données issues d'enchères," Économie et Prévision, Programme National Persée, Programme National Persée, vol. 132(1), pages 121-137.
  15. Jeitschko, Thomas D., 1999. "Equilibrium price paths in sequential auctions with stochastic supply," Economics Letters, Elsevier, Elsevier, vol. 64(1), pages 67-72, July.
  16. Caillaud, Bernard & Mezzetti, Claudio, 2004. "Equilibrium reserve prices in sequential ascending auctions," Journal of Economic Theory, Elsevier, Elsevier, vol. 117(1), pages 78-95, July.
  17. Neugebauer, Tibor & Pezanis-Christou, Paul, 2007. "Bidding behavior at sequential first-price auctions with(out) supply uncertainty: A laboratory analysis," Journal of Economic Behavior & Organization, Elsevier, Elsevier, vol. 63(1), pages 55-72, May.
  18. Ginsburgh, V. & Ours, J.C. van, 2003. "How to Organize Sequential Auctions: Results of a Natural Experiment by Christie's," Discussion Paper, Tilburg University, Center for Economic Research 2003-25, Tilburg University, Center for Economic Research.

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