Commitment in sequential auctioning: advance listings and threshold prices |
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Authors: | Robert Zeithammer |
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Institution: | (1) Anderson School of Management, UCLA, 110 Westwood Plaza, Los Angeles, CA 90095, USA |
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Abstract: | This paper models sequential auctioning of two perfect substitutes by a strategic seller, who learns about demand from the
first-auction price. The seller holds the second auction only when the remaining demand is strong enough to cover her opportunity
cost. Bidding in anticipation of such a contingent future auction is characterized, including a sufficient condition for existence
of an invertible (increasing symmetric pure-strategy) bidding equilibrium that facilitates the seller’s learning. A unique
invertible bidding equilibrium exists for the Dutch auction format, but only when the second auction is sufficiently discounted
by the bidders. In the equilibrium, high-valuation bidders shade their bids down as if the second auction were guaranteed.
To counter such strategic bidding, the seller would value ex-ante commitment to hold the second auction less often. Three
forms of such commitment are analyzed: commitment to list future auctions in advance, commitment to not hold the second auction
unless the first price exceeds a publicly announced threshold, and commitment to a reserve-price in the second auction.
I would like to thank Georgios Katsenos, Thomas Jeitschko, Miguel Villas-Boas, George Deltas, and an anonymous referee for
thorough and insightful feedback. |
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Keywords: | Auctions Game-theory Optimal selling Commitment Non-commitment dynamic pricing |
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