Information Revelation and Random Entry in Sequential Ascending Auctions
AbstractWe examine a model in which multiple buyers with single-unit demand are faced with an infinite sequence of auctions. New buyers arrive on the market probabilistically, and are each endowed with a constant private value. Moreover, objects also arrive on the market at random times, so the number of competitors and the degree of informational asymmetry among them may vary across from one auction to the next. We demonstrate by way of a simple example the inefficiency of the second-price sealed-bid auction in this setting, and therefore assume that each object is sold via ascending auction. We then characterize an efficient and fully revealing equilibrium for the game in which the objects are sold via ascending auctions. We show that each buyer's bids and payoffs depend only upon their rank amongst their competitors and the (revealed) values of those with lower values. Furthermore, strategies are memoryless---bids depend only upon the information revealed in the current auction, and not on any information that may have been revealed in earlier periods. We then demonstrate that the sequential ascending auction serves as an indirect mechanism that is equivalent---in our setting---to the dynamic marginal contribution mechanism introduced by Bergemann and Välimäki (2007) and generalized in Cavallo et al. (2007).
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 7160.
Date of creation: 14 Feb 2008
Date of revision:
Sequential auctions; Ascending auctions; Random arrivals; Information revelation; Dynamic Vickrey-Clarke-Groves mechanism; Marginal contribution;
Find related papers by JEL classification:
- D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
- D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
- C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-02-23 (All new papers)
- NEP-COM-2008-02-23 (Industrial Competition)
- NEP-CTA-2008-02-23 (Contract Theory & Applications)
- NEP-GTH-2008-02-23 (Game Theory)
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