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Best foot forward or best for last in a sequential auction?

  • Archishman Chakraborty
  • Nandini Gupta
  • Rick Harbaugh

Should a seller with private information sell the best or worst goods first? Considering the sequential auction of two stochastically equivalent goods, we find that the seller has an incentive to impress buyers by selling the better good first because the seller’s sequencing strategy endogenously generates correlation in the values of the goods across periods. When this impression effect is strong enough, selling the better good first is the unique pure-strategy equilibrium. By credibly revealing to all buyers the seller’s ranking of the goods, an equilibrium strategy of sequencing the goods reduces buyer information rents and increases expected revenues in accordance with the linkage principle.

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File URL: http://hdl.handle.net/10.1111/j.1756-2171.2006.tb00011.x
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Article provided by RAND Corporation in its journal RAND Journal of Economics.

Volume (Year): 37 (2006)
Issue (Month): 1 (03)
Pages: 176-194

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Handle: RePEc:bla:randje:v:37:y:2006:i:1:p:176-194
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  1. Raviv, Yaron, 2006. "New Evidence on Price Anomalies in Sequential Auctions: Used Cars in New Jersey," Journal of Business & Economic Statistics, American Statistical Association, vol. 24, pages 301-312, July.
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  14. Archishman Chakraborty & Nandini Gupta & Rick Harbaugh, 2002. "Seller Cheap Talk in Common Value Auctions," Claremont Colleges Working Papers 2002-30, Claremont Colleges.
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