Predatory Bidding in Sequential Auctions

Nils-Henrik von der Fehr

Oxford Economic Papers, 1994, vol. 46, issue 3, 345-56

Abstract: The work presented in this paper suggests that participation costs may have important, and perhaps surprising, effects on the types of equilibria that can exist in sequential auction models. It is shown that when two units of an item are auctioned in two consecutive English auctions and buyers' valuations are independently distributed and private information, prices will typically decline for later units if (some or all) buyers find participation in an auction costly. It is noted that such a price path is consistent with the so-called price decline anomaly. Copyright 1994 by Royal Economic Society.

Date: 1994
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