Best Foot Forward or Best for Last in a Sequential Auction?

Archishman Chakraborty (), Nandini Gupta and Rick Harbaugh ()
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Archishman Chakraborty: Baruch College, CUNY

RAND Journal of Economics, 2006, vol. 37, issue 1, pages 176-194

Abstract: 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. Ordering information: This article can be ordered from http://gemini.econ.umd.edu/cgi-bin/rje_online.cgi?action=view&year=2006&issue=spr&page=176.

Date: 2006
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Related works:
Working Paper: Best Foot Forward or Best for Last in a Sequential Auction? (2000)
Working Paper: Best Foot Forward or Best for Last in a Sequential Auction? (2004)
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