Implementing Optimal Outcome through Sequential Auctions

47 Pages Posted: 24 Jan 2017 Last revised: 10 Dec 2020

See all articles by Fanqi Shi

Fanqi Shi

School of Economics, Peking University

Yiqing Xing

Johns Hopkins University - Carey Business School

Date Written: December 6, 2020

Abstract

We study the optimal design of sequential auctions to sell heterogeneous items to buyers with private values and unit demand. The valuation of each item depends on a buyer’s private type and item-specific characteristics. We show that a sequence of arbitrary standard auctions, ordered in decreasing variation of buyers’ valuations, achieves full efficiency and constrained optimal revenue subject to (BIC), (IIR) and an all-sold condition. In addition, any sequential l-th price auction with the same ordering and optimal static reserve prices achieves optimal revenue subject to (BIC) and (IIR). We also provide discussions with respect to bid revelation policies and seller’s commitment power. Our analysis shows that in contrast to simultaneous auctions, a properly de- signed sequential auction is an indirect optimal selling procedure in the current setting, providing justification for its wide real-life applications.

Keywords: Optimal mechanism; Sequential auction; Standard auction; Bid disclosure

JEL Classification: D44, D82

Suggested Citation

Shi, Fanqi and Xing, Yiqing, Implementing Optimal Outcome through Sequential Auctions (December 6, 2020). Johns Hopkins Carey Business School Research Paper No. 17-10, Available at SSRN: https://ssrn.com/abstract=2903354 or http://dx.doi.org/10.2139/ssrn.2903354

Fanqi Shi

School of Economics, Peking University ( email )

No. 5 Yi Heyuan Road
Beijing, 100871
China
+8613520791730 (Phone)

Yiqing Xing (Contact Author)

Johns Hopkins University - Carey Business School ( email )

100 International Drive
Baltimore, MD 21202
United States

HOME PAGE: http://yiqingxing.com

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