Simultaneous vs. sequential auctions with risk averse bidders
Games and Economic Behavior, 2019, vol. 113, issue C, 209-222
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.
Keywords: Multi-unit auction; Risk aversion; Sequential auction; Optimal reserve (search for similar items in EconPapers)
JEL-codes: D44 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:gamebe:v:113:y:2019:i:c:p:209-222
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