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A Note on Sequential Auctions

Bernhardt, Dan and Scoones, David (1994) A Note on Sequential Auctions. American Economic Review, 84 (3). pp. 653-657. ISSN 0002-8282.

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This note explores multiobject, sequential, private-value auctions. Orley Ashenfelter (1989), Ashenfelter and David Genesove (1992), and R. Preston McAfee and Daniel Vincent (1993) document a puzzling "declining-price anomaly": in sequential auctions, mean sale prices for identical objects fall in later auctions by 0.25-1.5 percent.1 McAfee and Vincent observe that these findings are difficult to reconcile with accepted theory. Robert Weber (1983) shows that in sequential auctions of identical objects with risk-neutral bidders who hold in- dependent private values, the expected sale prices in each auction are identical. Further, if there is affiliation in values, then expected prices should rise in later auctions because early auctions release information, thereby reducing winner's curse concerns. McAfee and Vincent show that risk-aversion explanations are problematic. Pure- strategy equilibria with declining prices re- quire nondecreasing absolute risk aversion, something that does not seem to characterize individuals' attitudes toward risk. De- creasing absolute risk aversion is compatible with mixed-strategy equilibria, but when bidders randomize their bids, the auction need not be ex post efficient, as someone other that the highest-valuation bidder may win an object. This raises the possibility of resale.

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Additional Information:© 1994 American Economic Association. We are grateful to Anne Sholtz, Ruqu Wang, and an anonymous referee for helpful comments. Both authors acknowledge financial support from SSHRC.
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Social Sciences and Humanities Research Council (SSHRC)UNSPECIFIED
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Official Citation:Bernhardt, Dan, and David Scoones. “A Note on Sequential Auctions.” The American Economic Review, vol. 84, no. 3, 1994, pp. 653–657. JSTOR,
Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:80874
Deposited By: Tony Diaz
Deposited On:28 Aug 2017 22:55
Last Modified:03 Oct 2019 18:36

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