Second chance offers versus sequential auctions: theory and behavior |
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Authors: | Timothy C Salmon Bart J Wilson |
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Institution: | (1) Department of Economics, Florida State University, Tallahassee, FL 32306-2180, USA;(2) Interdisciplinary Center for Economics, George Mason University, 4400 University Drive, MSN 1B2, Fairfax, VA 22030, USA |
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Abstract: | Second chance offers in online marketplaces involve a seller conducting an auction for a single object and then using information
from the auction to offer a losing bidder a take-it-or-leave-it price for another unit. We theoretically and experimentally
investigate this practice and compare it to two sequential auctions. We show that the equilibrium bidding strategy in the
second chance offer mechanism only exists in mixed strategies, and we observe that this mechanism generates more profit for
the auctioneer than two sequential auctions. We also observe virtually no rejections of profitable offers in the ultimatum
bargaining stage.
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Keywords: | Ascending auctions Ultimatum games Mixed strategies Experimental economics |
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