Best Foot Forward or Best for Last in a Sequential Auction?
26 Pages Posted: 13 Apr 2001
Date Written: July 2004
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: Suggested Citation