First Impressions in a Sequential Auction
AbstractShould an informed seller lead with the best or worst good in a sequential auction? Considering the sale of two stochastically equivalent goods over two periods, we show that if second period buyers can observe the first period price, the seller has an incentive to lead with the best good so as to send a positive signal about the quality of the following good. This result holds even though the goods' values are independent because the seller's sequencing strategy endogenously generates correlation in the quality of the goods across periods. In contrast, a best for last strategy may not be as credible as the seller has an incentive to then sell his better good early. We also show that ex-ante expected profits from either of these strategies is higher than a babbling strategy of randomly sequencing the sale, even when the second period buyers do not observe the first period price.We discuss implications for the choice of sequential versus simultaneous auctions, the strategic choice of auction houses, the sequential auction of items of varying expected quality, the declining price anomaly observed in auction data, and the effects of selection bias on empirical studies of privatization auctions.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Econometric Society in its series Econometric Society World Congress 2000 Contributed Papers with number 1705.
Date of creation: 01 Aug 2000
Date of revision:
Contact details of provider:
Phone: 1 212 998 3820
Fax: 1 212 995 4487
Web page: http://www.econometricsociety.org/pastmeetings.asp
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Klemperer, Paul, 1999.
"Auction Theory: a Guide to the Literature,"
CEPR Discussion Papers
2163, C.E.P.R. Discussion Papers.
- Klemperer, P., 1999. "Auction Theory: a Guide to the Literature," Economics Papers 1999-w12, Economics Group, Nuffield College, University of Oxford.
- Paul Klemperer, 1999. "Auction Theory: A Guide to the Literature," Microeconomics 9903002, EconWPA.
- Paul Klemperer, 1999. "Auction Theory: A Guide to the Literature," Economics Series Working Papers 1999-W12, University of Oxford, Department of Economics.
- Bernhardt, Dan & Scoones, David, 1993.
"A Note on Sequential Auctions,"
829, California Institute of Technology, Division of the Humanities and Social Sciences.
- Avery, Christopher, 1998. "Strategic Jump Bidding in English Auctions," Review of Economic Studies, Wiley Blackwell, vol. 65(2), pages 185-210, April.
- Alan Beggs & Kathryn Graddy, 1997.
"Declining Values and the Afternoon Effect: Evidence from Art Auctions,"
RAND Journal of Economics,
The RAND Corporation, vol. 28(3), pages 544-565, Autumn.
- Beggs, A. & Graddy, K., 1996. "Declining Values and the Afternoon Effect: Evidence from Art Auctions," Economics Series Working Papers 99184, University of Oxford, Department of Economics.
- Milgrom, Paul & Weber, Robert J., 1982.
"The value of information in a sealed-bid auction,"
Journal of Mathematical Economics,
Elsevier, vol. 10(1), pages 105-114, June.
- Orley Ashenfelter & David Genesove, 1992.
"Testing for Price Anomalies in Real Estate Auctions,"
NBER Working Papers
4036, National Bureau of Economic Research, Inc.
- Ashenfelter, Orley & Genesove, David, 1992. "Testing for Price Anomalies in Real-Estate Auctions," American Economic Review, American Economic Association, vol. 82(2), pages 501-05, May.
- Ashenfelter, O. & Genesove, D., 1992. "Testing for Price Anomalies in Real Estate Auctions," Working papers 92-2, Massachusetts Institute of Technology (MIT), Department of Economics.
- Ashenfelter, O. & Genesove, D., 1992. "Testing for Price Anomalies in real Estate Auctions," Papers 128, Princeton, Department of Economics - Financial Research Center.
- Lusht, Kenneth M, 1994. "Order and Price in a Sequential Auction," The Journal of Real Estate Finance and Economics, Springer, vol. 8(3), pages 259-66, May.
- Maria Angeles de Frutos & Robert W. Rosenthal, 1997.
"On Some Myths about Sequenced Common-value Auctions,"
0077, Boston University - Industry Studies Programme.
- Angeles de Frutos, Maria & Rosenthal, Robert W., 1998. "On Some Myths about Sequenced Common-Value Auctions," Games and Economic Behavior, Elsevier, vol. 23(2), pages 201-221, May.
- Ashenfelter, Orley, 1989. "How Auctions Work for Wine and Art," Journal of Economic Perspectives, American Economic Association, vol. 3(3), pages 23-36, Summer.
- von der Fehr, Nils-Henrik Morch, 1994. "Predatory Bidding in Sequential Auctions," Oxford Economic Papers, Oxford University Press, vol. 46(3), pages 345-56, July.
- Paul Milgrom & Robert J. Weber, 1981.
"A Theory of Auctions and Competitive Bidding,"
447R, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Vanderporten, Bruce, 1992. "Strategic behavior in pooled condominium auctions," Journal of Urban Economics, Elsevier, vol. 31(1), pages 123-137, January.
- Black, Jane & De Meza, David, 1992. "Systematic Price Differences between Successive Auctions Are No Anomaly," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 1(4), pages 607-28, Winter.
- repec:att:wimass:9215 is not listed on IDEAS
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christopher F. Baum).
If references are entirely missing, you can add them using this form.