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Simultaneous vs. sequential auctions with risk averse bidders

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  • Chakraborty, Indranil

Abstract

In this paper we ask a basic question that is interesting for auctioneers and regulators when multiple units are on sale. Should multiple identical units be sold simultaneously through a single-shot auction or sequentially? We consider the risk effect of such a decision on bidders and show that in the independent private values setting the answer unambiguously depends on the pricing rule. A bidder's payoff uncertainty increases when the sale is sequenced under a pay-as-bid rule, but decreases under the Vickrey rule. We find that as a result the sequential auction is less desirable from revenue and ex post efficiency points of view under the pay-as-bid rule, and more desirable under the Vickrey rule, when the reserves in all auctions are set revenue-optimally.

Suggested Citation

  • Chakraborty, Indranil, 2019. "Simultaneous vs. sequential auctions with risk averse bidders," Games and Economic Behavior, Elsevier, vol. 113(C), pages 209-222.
    • Handle: RePEc:eee:gamebe:v:113:y:2019:i:c:p:209-222
    DOI: 10.1016/j.geb.2018.09.014
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    References listed on IDEAS

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    More about this item

    Keywords

    Multi-unit auction; Risk aversion; Sequential auction; Optimal reserve;
    All these keywords.

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions

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