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Endogenous Asymmetry in Sequential Auctions

Author

Listed:
  • Mauricio Bugarin
  • Wilfredo Leiva Maldonado

Abstract

This paper proposes an innovative methodology for sequential auctions of homogeneous goods that creates asymmetry among participants, thereby achieving higher revenue for the auctioneer. The asymmetry arises endogenously from a competitive advantage in the second auction granted to the winner of the first auction. The analysis shows that the auctioneer's expected revenue in this scenario is higher than in auctions without a competitive advantage and approaches the expected revenue of an optimal reserve price auction. After analyzing the benefits and drawbacks of the competitive advantage mechanism, this paper concludes that it represents a more effective auction design than conventional approaches.

Suggested Citation

  • Mauricio Bugarin & Wilfredo Leiva Maldonado, 2024. "Endogenous Asymmetry in Sequential Auctions," Working Papers, Department of Economics 2024_21, University of São Paulo (FEA-USP).
    • Handle: RePEc:spa:wpaper:2024wpecon21
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    File URL: http://www.repec.eae.fea.usp.br/documentos/Bugarin_Maldonado_21WP.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    Sequential auctions; Endogenous asymmetry; Strategic advantage;
    All these keywords.

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D47 - Microeconomics - - Market Structure, Pricing, and Design - - - Market Design

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