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Learning in Sequential Auctions

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  • Thomas D. Jeitschko

Abstract

The importance of information transmission and learning is studied in a model of a sequential auction in which bidders have independent private values. In the course of the auction, information about the bidders’ values becomes available as winning bids are revealed. From this, bidders learn about their opponents’ types. A more subtle effect of information is that bidders anticipate the generation of information and take this into account in the first auction. The equilibrium in this model is contrasted to a scenario in which bidders are unaware of informational effects. It is shown that bidders who are aware of informational effects place lower bids on average and hence have higher payoffs. Properties of the equilibrium price path are studied. Regardless of the outcome of the first auction, the second price is expected to be equal to the first price. Despite this, the probability of a decreasing price sequence depends on the information generated in the first auction. Finally, it is shown that a simultaneous auction, in which informational effects are absent, yields the same expected final allocation as the equilibrium.

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Bibliographic Info

Article provided by Southern Economic Association in its journal Southern Economic Journal.

Volume (Year): 65 (1998)
Issue (Month): 1 (July)
Pages: 98-112

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Handle: RePEc:sej:ancoec:v:65:1:y:1998:p:98-112

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Web page: http://www.southerneconomic.org/
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Cited by:
  1. Kannan, Karthik N., 2010. "Declining prices in sequential auctions with complete revelation of bids," Economics Letters, Elsevier, vol. 108(1), pages 49-51, July.
  2. Eric B. Rasmusen, 2001. "Starategic Implications of Uncertainty Over One's Own Private Value in Auctions," CIRJE F-Series CIRJE-F-127, CIRJE, Faculty of Economics, University of Tokyo.
  3. Yao, Zhiyong & Xiao, Zhiguo, 2013. "A note on sequential auctions with multi-unit demand," Mathematical Social Sciences, Elsevier, vol. 66(3), pages 276-281.
  4. Said, Maher, 2008. "Information Revelation and Random Entry in Sequential Ascending Auctions," MPRA Paper 7160, University Library of Munich, Germany.
  5. Jeitschko, Thomas D., 1999. "Equilibrium price paths in sequential auctions with stochastic supply," Economics Letters, Elsevier, vol. 64(1), pages 67-72, July.

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