Equilbrium Price Paths in Sequential Auctions with Stochastic Supply

Abstract:     
In many settings where several objects are auctioned sequentially, the total supply is not known with certainity ex ante. In such settings, price formation over the sequence of sales depends critically on the information available to the bidders regarding the remaining supply. For instance, prices may decline due to a reduced "option value" in early auctions caused by uncertain supply. However, if in the course of the auction it becomes known that fewer than expected units will be auctioned, prices may increase due to diminished supply and the corresponding increase in competition in latter auctions.

Number of Pages in PDF File: 9

JEL Classification: D44

working papers series