The Wait-and-See Option in Ascending Price Auctions
Ascending auctions offer agents the option to wait and see before deciding to drop out. We show that in contexts where as time proceeds agents get finer and finer estimates of their valuations, incentives to drop out at one's expected valuation are weak: it is optimal for agents to wait and see. We first illustrate the claim in a private value setting. We next analyze an interdependent value setting in which this wait and see option results in an imperfect information aggregation. We also analyze the implications for the seller's revenue, and show that the ascending format may dominate the second-price format, independently of the date at which the second price auction is run. (JEL: D44, D83) Copyright (c) 2004 The European Economic Association.
Volume (Year): 2 (2004)
Issue (Month): 2-3 (04/05)
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