Best Foot Forward or Best for Last in a Sequential Auction?

26 Pages Posted: 13 Apr 2001  

Archishman Chakraborty

York University - Schulich School of Business

Nandini Gupta

Indiana University - Kelley School of Business - Department of Finance

Rick Harbaugh

Indiana University - Kelley School of Business - Department of Business Economics & Public Policy; Indiana University - Department of Economics

Date Written: July 2004

Abstract

Should a seller with private information sell the best or worst goods first? Considering the sequential auction of two stochastically equivalent goods, we find that the seller has an incentive to impress buyers by selling the better good first because the seller's sequencing strategy endogenously generates correlation in the values of the goods across periods. When this impression effect is strong enough, selling the better good first is the unique pure-strategy equilibrium. By credibly revealing to all buyers the seller's ranking of the goods, an equilibrium strategy of sequencing the goods reduces buyer information rents and increases expected revenues in accordance with the linkage principle.

Keywords: Sequential Auctions, Seller information, Seller Sequencing, Declining Price Anomaly, Linkage Principle, Privatization Auctions

JEL Classification: D44, D82

Suggested Citation

Chakraborty, Archishman and Gupta, Nandini and Harbaugh, Rick, Best Foot Forward or Best for Last in a Sequential Auction? (July 2004). Available at SSRN: https://ssrn.com/abstract=263534 or http://dx.doi.org/10.2139/ssrn.263534

Archishman Chakraborty (Contact Author)

York University - Schulich School of Business ( email )

4700 Keele Street
Toronto, Ontario M3J 1P3
Canada

HOME PAGE: http://www.yorku.ca/archish/

Nandini Gupta

Indiana University - Kelley School of Business - Department of Finance ( email )

1309 E. 10th St.
Bloomington, IN 47405
United States
812-855-3416 (Phone)
812-855-5875 (Fax)

Rick Harbaugh

Indiana University - Kelley School of Business - Department of Business Economics & Public Policy ( email )

Bloomington, IN 47405
United States
812-855-2777 (Phone)
812-855-3354 (Fax)

HOME PAGE: http://www.bus.indiana.edu/riharbau/

Indiana University - Department of Economics ( email )

Wylie Hall
Bloomington, IN 47405-6620
United States

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