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

Archishman Chakraborty, Nandini Gupta and Rick Harbaugh ()
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Archishman Chakraborty: Zicklin School of Business, Baruch College, CUNY

No 2004-07, Working Papers from Indiana University, Kelley School of Business, Department of Business Economics and Public Policy

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.

Keywords: sequential auction; impression effect; linkage principle; declining price anomaly (search for similar items in EconPapers)
JEL-codes: L13 D44 D82 (search for similar items in EconPapers)
Date: 2004
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Published in Rand Journal of Economics, 2006

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Related works:
Working Paper: Best Foot Forward or Best for Last in a Sequential Auction? (2000)
Journal Article: Best Foot Forward or Best for Last in a Sequential Auction? (2006)
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Persistent link: http://EconPapers.repec.org/RePEc:iuk:wpaper:2004-07

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