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Sequential auctions with randomly arriving buyers

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  • Said, Maher

Abstract

We analyze a dynamic market in which buyers compete in a sequence of private-value auctions for differentiated goods. New buyers and new objects may arrive at random times. Since objects are imperfect substitutes, buyers' values are not persistent. Instead, each buyer's private value for a new object is a new independent draw from the same distribution. We consider the use of second-price auctions for selling these objects, and show that there exists a unique symmetric Markov equilibrium in this market. In equilibrium, buyers shade their bids down by their continuation value, which is the (endogenous) option value of participating in future auctions. We characterize this option value and show that it depends not only on the number of buyers currently present on the market and the distribution of their values, but also on anticipated market dynamics.

Suggested Citation

  • Said, Maher, 2011. "Sequential auctions with randomly arriving buyers," Games and Economic Behavior, Elsevier, vol. 73(1), pages 236-243, September.
  • Handle: RePEc:eee:gamebe:v:73:y:2011:i:1:p:236-243
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    References listed on IDEAS

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    1. Mark Satterthwaite & Artyom Shneyerov, 2007. "Dynamic Matching, Two-Sided Incomplete Information, and Participation Costs: Existence and Convergence to Perfect Competition," Econometrica, Econometric Society, vol. 75(1), pages 155-200, January.
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    Citations

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    Cited by:

    1. Said, Maher, 2012. "Auctions with dynamic populations: Efficiency and revenue maximization," Journal of Economic Theory, Elsevier, vol. 147(6), pages 2419-2438.
    2. Budde, Maximilian & Minner, Stefan, 2015. "Optimal capacity provision for service providers with subsequent auctioning of projects," International Journal of Production Economics, Elsevier, vol. 170(PB), pages 652-662.
    3. Bergemann, Dirk & Pavan, Alessandro, 2015. "Introduction to Symposium on Dynamic Contracts and Mechanism Design," Journal of Economic Theory, Elsevier, vol. 159(PB), pages 679-701.
    4. Hummel, Patrick, 2015. "Simultaneous use of auctions and posted prices," European Economic Review, Elsevier, vol. 78(C), pages 269-284.
    5. Bryan Lim, 2010. "The Case for Last-Second Bidding," Levine's Working Paper Archive 661465000000000343, David K. Levine.
    6. repec:bla:worlde:v:40:y:2017:i:8:p:1624-1645 is not listed on IDEAS
    7. Pownall, Rachel A.J. & Wolk, Leonard, 2013. "Bidding behavior and experience in internet auctions," European Economic Review, Elsevier, vol. 61(C), pages 14-27.
    8. Dennis Clerck & Erik Demeulemeester, 2016. "A sequential procurement model for a PPP project pipeline," OR Spectrum: Quantitative Approaches in Management, Springer;Gesellschaft für Operations Research e.V., vol. 38(2), pages 427-457, March.
    9. repec:eee:indorg:v:54:y:2017:i:c:p:125-147 is not listed on IDEAS
    10. Dirk Bergemann & Alessandro Pavan, 2015. "Introduction to JET Symposium Issue on "Dynamic Contracts and Mechanism Design"," Cowles Foundation Discussion Papers 2016, Cowles Foundation for Research in Economics, Yale University.

    More about this item

    Keywords

    Dynamic markets Sequential auctions Endogenous options Random arrivals Stochastic equivalence Symmetric Markov equilibrium;

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games

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