Synergies and price trends in sequential auctions
In this paper we consider sequential second-price auctions where an individual's value for a bundle of objects is either greater than the sum of the values for the objects separately (positive synergy) or less than the sum (negative synergy). We show that the existence of positive synergies implies declining expected prices. When synergies are negative, expected prices are increasing. There are several corollaries. First, the seller is indifferent between selling the objects simultaneously as a bundle or sequentially when synergies are positive. Second, when synergies are negative, the expected revenue generated by the simultaneous auction can be larger or smaller than the expected revenue generated by the sequential auction. In addition, in the presence of positive synergies, an option to buy the additional object at the price of the first object is never exercised in the symmetric equilibrium and the seller's revenue is unchanged. Under negative synergies, in contrast, if there is an equilibrium where the option is never exercised, then equilibrium prices may either increase or decrease and, therefore, the net effect on the seller's revenue of the introduction of an option is ambiguous. Finally, we examine a special case with asymmetric players who have distinct synergies. In this example, even if one player has positive synergies and the other has negative synergies, it is still possible for expected prices to decline. Copyright Springer-Verlag Berlin/Heidelberg 2003
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 8 (2003)
Issue (Month): 1 (August)
|Contact details of provider:|| Web page: http://link.springer.de/link/service/journals/10058/index.htm|
|Order Information:||Web: http://link.springer.de/orders.htm|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Flavio Menezes & Paulo Monteiro, 1997.
"Sequential asymmetric auctions with endogenous participation,"
Theory and Decision,
Springer, vol. 43(2), pages 187-202, September.
- Fl. Menezes & P.K.Monteiro, 1994. "Sequential Asymmetric Auctions With Endogenous Participation," Microeconomics 9402001, EconWPA, revised 09 Jun 1994.
- Bernhardt, Dan & Scoones, David, 1993.
"A Note on Sequential Auctions,"
829, California Institute of Technology, Division of the Humanities and Social Sciences.
- Ashenfelter, O. & Genesove, D., 1992.
"Testing for Price Anomalies in real Estate Auctions,"
128, Princeton, Department of Economics - Financial Research Center.
- Ashenfelter, Orley & Genesove, David, 1992. "Testing for Price Anomalies in Real-Estate Auctions," American Economic Review, American Economic Association, vol. 82(2), pages 501-05, May.
- Orley Ashenfelter & David Genesove, 1992. "Testing for Price Anomalies in Real Estate Auctions," NBER Working Papers 4036, National Bureau of Economic Research, Inc.
- Ashenfelter, O. & Genesove, D., 1992. "Testing for Price Anomalies in Real Estate Auctions," Working papers 92-2, Massachusetts Institute of Technology (MIT), Department of Economics.
- Jeitschko, Thomas D. & Wolfstetter, Elmar, 1998.
"Scale economies and the dynamics of recurring auctions,"
SFB 373 Discussion Papers
1998,62, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
- Thomas D. Jeitschko & Elmar Wolfstetter, 2002. "Scale Economies and the Dynamics of Recurring Auctions," Economic Inquiry, Western Economic Association International, vol. 40(3), pages 403-414, July.
- Vijay Krishna & Robert Rosenthal, 1995.
"Simultaneous Auctions with Synergies,"
Game Theory and Information
- Ashenfelter, Orley, 1989. "How Auctions Work for Wine and Art," Journal of Economic Perspectives, American Economic Association, vol. 3(3), pages 23-36, Summer.
- Vanderporten, Bruce, 1992. "Timing of Bids at Pooled Real Estate Auctions," The Journal of Real Estate Finance and Economics, Springer, vol. 5(3), pages 255-67, September.
- Branco, Fernando, 1997. "Sequential auctions with synergies: An example," Economics Letters, Elsevier, vol. 54(2), pages 159-163, February.
- McAfee R. Preston & Vincent Daniel, 1993. "The Declining Price Anomaly," Journal of Economic Theory, Elsevier, vol. 60(1), pages 191-212, June.
- Jones, C. & Menezes, F. & Vella, F., 1996.
"Auctions Price Anomalies: Evidence from Wool Auctions in Australia,"
303, Australian National University - Department of Economics.
- Chris Jones & Flavio Menezes & Francis Vella, 2004. "Auction Price Anomalies: Evidence from Wool Auctions in Australia," The Economic Record, The Economic Society of Australia, vol. 80(250), pages 271-288, 09.
- Jane Black & David de Meza, 1992.
"Systematic Price Differences Between Successive Auctionsare no Anomaly,"
Journal of Economics & Management Strategy,
Wiley Blackwell, vol. 1(4), pages 607-628, December.
- Black, Jane & De Meza, David, 1992. "Systematic Price Differences between Successive Auctions Are No Anomaly," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 1(4), pages 607-28, Winter.
- Vanderporten, Bruce, 1992. "Strategic behavior in pooled condominium auctions," Journal of Urban Economics, Elsevier, vol. 31(1), pages 123-137, January.
- Gandal, Neil, 1997. "Sequential Auctions of Interdependent Objects: Israeli Cable Television Licenses," Journal of Industrial Economics, Wiley Blackwell, vol. 45(3), pages 227-44, September.
When requesting a correction, please mention this item's handle: RePEc:spr:reecde:v:8:y:2003:i:1:p:85-98. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Guenther Eichhorn)or (Christopher F Baum)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.