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Discounting in Sequential Auctions

Author

Listed:
  • Kittsteiner, Thomas

    (Sonderforschungsbereich 504)

  • Nikutta, Jörg

    (Universität Mannheim)

  • Winter, Eyal

    (Center of Rationality and Interactive Decision Theory, Hebrew University of Jerusalem)

Abstract

We analyze an independent private values model where a number of objects are sold in sequential first- and second-price auctions. Bidders have unit demand and their valuation for an object is decreasing in the rank number of the auction to which it is sold. Whether prices are announced after each auction or if no information is given to bidders, we derive efficient equilibria. Our main result shows that the sequence of prices constitutes a supermartingale. Even if we correct for the decrease in valuations for objects sold in later auctions we find that average prices are declining. Our result helps explain the declining price anomaly and the afternoon effect observed in sequential auctions.

Suggested Citation

  • Kittsteiner, Thomas & Nikutta, Jörg & Winter, Eyal, 2002. "Discounting in Sequential Auctions," Sonderforschungsbereich 504 Publications 02-15, Sonderforschungsbereich 504, Universität Mannheim;Sonderforschungsbereich 504, University of Mannheim.
    • Handle: RePEc:xrs:sfbmaa:02-15
    Note: Financial support from the Deutsche Forschungsgemeinschaft, SFB 504, at the University of Mannheim, is gratefully acknowledged.
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