Information Revelation in Sequential Ascending Auctions

29 Pages Posted: 8 Feb 2008 Last revised: 14 May 2009

See all articles by Maher Said

Maher Said

NYU Stern School of Business

Date Written: October 7, 2008

Abstract

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.

Keywords: Sequential auctions, Ascending auctions, Random arrivals, Information revelation, Dynamic Vickrey-Clarke-Groves mechanism, Marginal contribution

JEL Classification: C73, D44, D83

Suggested Citation

Said, Maher, Information Revelation in Sequential Ascending Auctions (October 7, 2008). Available at SSRN: https://ssrn.com/abstract=1091350 or http://dx.doi.org/10.2139/ssrn.1091350

Maher Said (Contact Author)

NYU Stern School of Business ( email )

44 West 4th Street
New York, NY 10012
United States

HOME PAGE: http://www.mahersaid.com/

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