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Information Revelation and Random Entry in Sequential Ascending Auctions

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  • Said, Maher

Abstract

We 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 Info

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

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Date of creation: 14 Feb 2008
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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; Marginal contribution;

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References

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  1. 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.
  2. Thomas Kittsteiner & Jörg Nikutta & Eyal Winter, 2004. "Declining valuations in sequential auctions," International Journal of Game Theory, Springer, vol. 33(1), pages 89-106, January.
  3. Paul Milgrom & Robert J. Weber, 1981. "A Theory of Auctions and Competitive Bidding," Discussion Papers 447R, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  4. Andrzej Skrzypacz & William Fuchs, 2007. "Bargaining with Arrival of New Traders," 2007 Meeting Papers 186, Society for Economic Dynamics.
  5. Caillaud, Bernard & Mezzetti, Claudio, 2004. "Equilibrium reserve prices in sequential ascending auctions," Journal of Economic Theory, Elsevier, vol. 117(1), pages 78-95, July.
  6. Juuso Valimaki & Dirk Bergemann, 2008. "Dynamic Marginal Contribution Mechanism," 2008 Meeting Papers 317, Society for Economic Dynamics.
  7. Thomas D. Jeitschko, 1998. "Learning in Sequential Auctions," Southern Economic Journal, Southern Economic Association, vol. 65(1), pages 98-112, July.
  8. 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.
  9. Sailer, Katharina, 2006. "Searching the eBay Marketplace," Discussion Papers in Economics 1234, University of Munich, Department of Economics.
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Cited by:
  1. Said, Maher, 2008. "Auctions with Dynamic Populations: Efficiency and Revenue Maximization," MPRA Paper 11456, University Library of Munich, Germany.
  2. Said, Maher, 2011. "Sequential auctions with randomly arriving buyers," Games and Economic Behavior, Elsevier, vol. 73(1), pages 236-243, September.
  3. Dirk Bergemann & Maher Said, 2010. "Dynamic Auctions: A Survey," Cowles Foundation Discussion Papers 1757, Cowles Foundation for Research in Economics, Yale University.

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