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A Resale Explanation for the Declining Price Anomaly in Sequential Auctions

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  • Tu, Zhiyong

Abstract

This paper studies price trends in a sequential first-price common-value auction with resale. It differs from the previous research in that it considers sequential auctions with multi-unit demand. In the two-stage case, we propose a condition that guarantees the existence of a symmetric monotonic equilibrium which exhibits a declining trend. This is because bidders have the incentive to overbid in the first round to lower their rivals' intertemporal inference on the object value so that they can obtain a second-stage advantage. We also characterize the necessary properties of symmetric monotonic equilibria in the finite N-stage and the infinite-stage cases. In the former case, the price trend remains constant and drops only at the last stage; in the latter case, we have a constant price trend throughout.

Suggested Citation

  • Tu, Zhiyong, 2010. "A Resale Explanation for the Declining Price Anomaly in Sequential Auctions," Review of Applied Economics, Lincoln University, Department of Financial and Business Systems, vol. 6(1-2), pages 1-15, April.
    • Handle: RePEc:ags:reapec:143272
    DOI: 10.22004/ag.econ.143272
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    References listed on IDEAS

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    Cited by:

    1. Vishnu V. Narayan & Enguerrand Prebet & Adrian Vetta, 2019. "The Declining Price Anomaly is not Universal in Multi-Buyer Sequential Auctions (but almost is)," Papers 1905.00853, arXiv.org.

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