Sequential auctions, price trends, and risk preferences

Audrey Hu and Liang Zou

Journal of Economic Theory, 2015, vol. 158, issue PA, 319-335

Abstract: We analyze sequential auctions in a general environment where bidders are heterogeneous in risk exposures and exhibit non-quasilinear utilities. We derive a pure strategy symmetric equilibrium for the sequential Dutch and Vickrey auctions respectively, with an arbitrary number of identical objects for sale. When bidders are risk averse (preferring), the equilibrium price sequences must be downward (upward) drifting. The “declining price anomaly” is thus evidence of bidder risk aversion in this general environment. These results derive from a key assumption that bidders' marginal utilities are log-supermodular in payment and type.

Keywords: Sequential auction; Background risk; Risk preference; Declining price; Log-supermodularity; Ex-post efficiency (search for similar items in EconPapers)
JEL-codes: D44 D82 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jetheo:v:158:y:2015:i:pa:p:319-335

DOI: 10.1016/j.jet.2015.05.006

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