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Sequential auctions with randomly arriving buyers

  • Said, Maher

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.

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Article provided by Elsevier in its journal Games and Economic Behavior.

Volume (Year): 73 (2011)
Issue (Month): 1 (September)
Pages: 236-243

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Handle: RePEc:eee:gamebe:v:73:y:2011:i:1:p:236-243
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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, 01.
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  11. Said, Maher, 2008. "Information Revelation and Random Entry in Sequential Ascending Auctions," MPRA Paper 7160, University Library of Munich, Germany.
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  16. Haile, Philip A., 2000. "Partial Pooling at the Reserve Price in Auctions with Resale Opportunities," Games and Economic Behavior, Elsevier, vol. 33(2), pages 231-248, November.
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