Premium
Learning in Sequential Auctions
Author(s) -
Jeitschko Thomas D.
Publication year - 1998
Publication title -
southern economic journal
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.762
H-Index - 58
eISSN - 2325-8012
pISSN - 0038-4038
DOI - 10.1002/j.2325-8012.1998.tb00130.x
Subject(s) - common value auction , vickrey–clarke–groves auction , vickrey auction , english auction , microeconomics , revenue equivalence , unique bid auction , generalized second price auction , private information retrieval , auction theory , information transmission , outcome (game theory) , economics , computer science , computer network , computer security
The importance of information transmission and learning is studied in a model of a sequential auction in which bidders have independent private values. In the course of the auction, information about the bidders' values becomes available as winning bids are revealed. From this, bidders learn about their opponents' types. A more subtle effect of information is that bidders anticipate the generation of information and take this into account in the first auction. The equilibrium in this model is contrasted to a scenario in which bidders are unaware of informational effects. It is shown that bidders who are aware of informational effects place lower bids on average and hence have higher payoffs. Properties of the equilibrium price path are studied. Regardless of the outcome of the first auction, the second price is expected to be equal to the first price. Despite this, the probability of a decreasing price sequence depends on the information generated in the first auction. Finally, it is shown that a simultaneous auction, in which informational effects are absent, yields the same expected final allocation as the equilibrium.