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Information Revelation in Sequential Ascending Auctions

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Author Info
Said, Maher

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Abstract

We examine a model in which buyers with single-unit demand are faced with an infinite sequence of auctions. In each period, a new buyer probabilistically arrives to the market, and is endowed with a constant private value. We demonstrate by way of a simple example the inefficiency of the second-price sealed-bid auction in this setting, and therefore focus instead on the ascending auction. We then show that the mechanism in which the objects are sold via ascending auctions has an efficient, fully revealing, and Markov perfect Bayesian equilibrium which is ex post optimal for all buyers in each period, given their expectations about the future. In equilibrium, all buyers completely reveal their private information in every period. However, equilibrium bidding behavior is memoryless. Bids depend only upon the information revealed in the current auction, and not on any information revealed in previous periods. This lack of memory is crucial, as it allows buyers to behave symmetrically, despite the informational asymmetry arising from the arrival of uninformed buyers. This provides the appropriate incentives for these new buyers to also reveal their information.

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Publisher Info
Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 7160.

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Date of creation: 07 Oct 2008
Date of revision: 07 Oct 2008
Handle: RePEc:pra:mprapa:7160

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Related research
Keywords: Sequential auctions Ascending auctions Random arrivals Information revelation Dynamic Vickrey-Clarke-Groves mechanism Pivotal mechanism Marginal contribution

Other versions of this item:

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

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References listed on IDEAS
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.:
  1. Dirk Bergemann & Juuso Valimaki, 2007. "Dynamic Marginal Contribution Mechanism," Cowles Foundation Discussion Papers 1616, Cowles Foundation, Yale University. [Downloadable!]
    Other versions:
  2. Caillaud, Bernard & Mezzetti, Claudio, 2004. "Equilibrium reserve prices in sequential ascending auctions," Journal of Economic Theory, Elsevier, vol. 117(1), pages 78-95, July. [Downloadable!] (restricted)
  3. Katharina Sailer, 2006. "Searching the eBay Marketplace," CESifo Working Paper Series CESifo Working Paper No. , CESifo GmbH. [Downloadable!]
    Other versions:
  4. Alvin E. Roth & Axel Ockenfels, 2002. "Last-Minute Bidding and the Rules for Ending Second-Price Auctions: Evidence from eBay and Amazon Auctions on the Internet," American Economic Review, American Economic Association, vol. 92(4), pages 1093-1103, September. [Downloadable!]
    Other versions:
  5. Thomas Kittsteiner & Jorg Nikutta & Eyal Winter, 2004. "Declining Valuations in Sequential Auctions," Discussion Paper Series dp385, Center for Rationality and Interactive Decision Theory, Hebrew University, Jerusalem. [Downloadable!]
    Other versions:
  6. Roman Inderst, 2008. "Dynamic Bilateral Bargaining under Private Information with a Sequence of Potential Buyers," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 11(1), pages 220-236, January. [Downloadable!] (restricted)
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Cited by:
(explanations, 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.)

  1. Said, Maher, 2008. "Stochastic Equivalence in Sequential Auctions with New Buyers," MPRA Paper 9868, University Library of Munich, Germany. [Downloadable!]
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This page was last updated on 2008-11-17.

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