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Sequential vs. Single-Round Uniform-Price Auctions

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  • Claudio Mezzetti

    (University of North Carolina)

  • Aleksandar Pekec

    (The Fuqua School of Business, Duke University)

  • Ilia Tsetlin

    (INSEAD)

Abstract

We study sequential and single-round uniform-price auctions with affiliated values. We derive symmetric equilibrium for the auction in which k1 objects are sold in the first round and k2 in the second round, with and without revelation of the first-round winning bids. We demonstrate that auctioning objects in sequence generates a lowballing effect that reduces first-round revenue. Thus, revenue is greater in a single-round, uniform auction for k = k1 + k2 objects than in a sequential uniform auction with no bid announcement. When the first-round winning bids are announced, we also identify two informational effects: a positive effect on second-round price and an ambiguous effect on first-round price. The expected first-round price can be greater or smaller than with no bid announcement, and greater or smaller than the expected price in a single-round uniform auction. As a result, total expected revenue in a sequential uniform auction with winning-bids announcement can be greater or smaller than in a single-round uniform auction.

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Bibliographic Info

Paper provided by Fondazione Eni Enrico Mattei in its series Working Papers with number 2004.147.

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Date of creation: Dec 2004
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Handle: RePEc:fem:femwpa:2004.147

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Keywords: Multi-unit auctions; Sequential auctions; Uniform-price auction; Affiliated values; Information revelation;

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  1. Mezzetti, Claudio & Tsetlin, Ilia, 2008. "On the lowest-winning-bid and the highest-losing-bid auctions," Journal of Mathematical Economics, Elsevier, vol. 44(9-10), pages 1040-1048, September.
  2. 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.
  3. William Vickrey, 1961. "Counterspeculation, Auctions, And Competitive Sealed Tenders," Journal of Finance, American Finance Association, vol. 16(1), pages 8-37, 03.
  4. Donald B. Hausch, 1986. "Multi-Object Auctions: Sequential vs. Simultaneous Sales," Management Science, INFORMS, vol. 32(12), pages 1599-1610, December.
  5. Paul Klemperer, 1999. "Auction Theory: A Guide to the Literature," Economics Series Working Papers 1999-W12, University of Oxford, Department of Economics.
  6. Motty Perry & Philip J. Reny, 1999. "On The Failure of the Linkage Principle in Multi-Unit Auctions," Econometrica, Econometric Society, vol. 67(4), pages 895-900, July.
  7. Milgrom, Paul R & Weber, Robert J, 1982. "A Theory of Auctions and Competitive Bidding," Econometrica, Econometric Society, vol. 50(5), pages 1089-1122, September.
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Cited by:
  1. Paul Pezanis-Christou, 2013. "Asymmetric Multiple-Object First-Price Auctions," School of Economics Working Papers 2013-07, University of Adelaide, School of Economics.
  2. Rosato, Antonio, 2014. "Loss Aversion in Sequential Auctions: Endogenous Interdependence, Informational Externalities and the "Afternoon Effect"," MPRA Paper 56824, University Library of Munich, Germany.
  3. Francesco Giovannoni & Miltiadis Makris, 2014. "Reputational Bidding," Bristol Economics Discussion Papers 14/641, Department of Economics, University of Bristol, UK.

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