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Learning in Sequential Auctions

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  • Thomas D. Jeitschko

Abstract

The importance of information transmission and learning is studied in a model of a sequential auction in which bidders have independent private values. In the course of the auction, information about the bidders’ values becomes available as winning bids are revealed. From this, bidders learn about their opponents’ types. A more subtle effect of information is that bidders anticipate the generation of information and take this into account in the first auction. The equilibrium in this model is contrasted to a scenario in which bidders are unaware of informational effects. It is shown that bidders who are aware of informational effects place lower bids on average and hence have higher payoffs. Properties of the equilibrium price path are studied. Regardless of the outcome of the first auction, the second price is expected to be equal to the first price. Despite this, the probability of a decreasing price sequence depends on the information generated in the first auction. Finally, it is shown that a simultaneous auction, in which informational effects are absent, yields the same expected final allocation as the equilibrium.

Suggested Citation

  • Thomas D. Jeitschko, 1998. "Learning in Sequential Auctions," Southern Economic Journal, Southern Economic Association, vol. 65(1), pages 98-112, July.
  • Handle: RePEc:sej:ancoec:v:65:1:y:1998:p:98-112
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    Cited by:

    1. Rasmusen Eric Bennett, 2006. "Strategic Implications of Uncertainty over One's Own Private Value in Auctions," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 6(1), pages 1-22, November.
    2. Yao, Zhiyong & Xiao, Zhiguo, 2013. "A note on sequential auctions with multi-unit demand," Mathematical Social Sciences, Elsevier, vol. 66(3), pages 276-281.
    3. Timothy N. Cason & Karthik N. Kannan & Ralph Siebert, 2011. "An Experimental Study of Information Revelation Policies in Sequential Auctions," Management Science, INFORMS, vol. 57(4), pages 667-688, April.
    4. Kannan, Karthik N., 2010. "Declining prices in sequential auctions with complete revelation of bids," Economics Letters, Elsevier, vol. 108(1), pages 49-51, July.
    5. Victor Ginsburgh & Jan van Ours, 2007. "How to organize a sequential auction: results of a natural experiment by Christie's," ULB Institutional Repository 2013/5255, ULB -- Universite Libre de Bruxelles.
    6. Boudreau, James W. & Shunda, Nicholas, 2016. "Sequential auctions with budget constraints: Evidence from fantasy basketball auction drafts," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 62(C), pages 8-22.
    7. Dominic Coey & Bradley Larsen & Brennan Platt, 2016. "A Theory of Bidding Dynamics and Deadlines in Online Retail," NBER Working Papers 22038, National Bureau of Economic Research, Inc.
    8. Levy, Yehuda John, 2015. "Limits to rational learning," Journal of Economic Theory, Elsevier, vol. 160(C), pages 1-23.
    9. 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.
    10. repec:eee:enepol:v:110:y:2017:i:c:p:394-402 is not listed on IDEAS
    11. Jeitschko, Thomas D., 1999. "Equilibrium price paths in sequential auctions with stochastic supply," Economics Letters, Elsevier, vol. 64(1), pages 67-72, July.
    12. Lu, Y. & Gupta, A. & Ketter, W. & van Heck, H.W.G.M., 2017. "Information Transparency in B2B Auction Markets: The Role of Winner Identity Disclosure," ERIM Report Series Research in Management ERS-2017-006-LIS, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.
    13. Said, Maher, 2008. "Information Revelation and Random Entry in Sequential Ascending Auctions," MPRA Paper 7160, University Library of Munich, Germany.

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