Information Revelation in Sequential Ascending Auctions

We examine a model in which buyers with single-unit demand are faced with an infinite sequence of auctions. In each period, a new buyer probabilistically arrives to the market, and is endowed with a constant private value. We demonstrate by way of a simple example the inefficiency of the second-price sealed-bid auction in this setting, and therefore focus instead on the ascending auction. We then show that the mechanism in which the objects are sold via ascending auctions has an efficient, fully revealing, and Markov perfect Bayesian equilibrium which is ex post optimal for all buyers in each period, given their expectations about the future. In equilibrium, all buyers completely reveal their private information in every period. However, equilibrium bidding behavior is memoryless. Bids depend only upon the information revealed in the current auction, and not on any information revealed in previous periods. This lack of memory is crucial, as it allows buyers to behave symmetrically, despite the informational asymmetry arising from the arrival of uninformed buyers. This provides the appropriate incentives for these new buyers to also reveal their information.

[1]  Paul R. Milgrom,et al.  A theory of auctions and competitive bidding , 1982 .

[2]  Thomas D. Jeitschko,et al.  Learning in Sequential Auctions , 1997 .

[3]  Paul R. Milgrom,et al.  A Theory of Auctions and Competitive Bidding II , 2000 .

[4]  Ali Hortaçsu,et al.  Winner's Curse, Reserve Prices and Endogenous Entry: Empirical Insights from Ebay Auctions , 2003 .

[5]  A. Roth,et al.  Last-Minute Bidding and the Rules for Ending Second-Price Auctions: Evidence from eBay and Amazon Auctions on the Internet , 2002 .

[6]  Eyal Winter,et al.  Declining valuations in sequential auctions , 2004, Int. J. Game Theory.

[7]  Claudio Mezzetti,et al.  Equilibrium reserve prices in sequential ascending auctions , 2004, J. Econ. Theory.

[8]  K. Sailer.  Searching the Ebay Marketplace , 2006, SSRN Electronic Journal.

[9]  Michael Peters,et al.  Internet Auctions with Many Traders , 2002, J. Econ. Theory.

[10]  Robert Zeithammer.  Forward-Looking Bidding in Online Auctions , 2005 .

[11]  Efe A. Ok.  Real analysis with economic applications , 2007 .

[12]  David C. Parkes,et al.  Efficient Online Mechanisms for Persistent, Periodically Inaccessible Self-Interested Agents , 2007 .

[13]  Denis Nekipelov.  Entry Deterrence and Learning Prevention on eBay ∗ , 2007 .

[14]  Peter R. Wurman,et al.  The Non-Existence of Equilibrium in Sequential Auctions When Bids Are Revealed , 2007 .

[15]  Andrzej Skrzypacz,et al.  Bargaining with Arrival of New Traders , 2010 .

[16]  Maher Said.  STOCHASTIC EQUIVALENCE IN SEQUENTIAL AUCTIONS WITH NEW BUYERS , 2008 .

[17]  Roman Inderst,et al.  Dynamic bilateral bargaining under private information with a sequence of potential buyers , 2008 .

[18]  D. Bergemann,et al.  The Dynamic Pivot Mechanism , 2008 .