Option Values in Sequential Markets

Nils-Henrik von der Fehr and Christian Riis ()

No 07/1998, Memorandum from Oslo University, Department of Economics

Abstract: We consider competitive behaviour in sequential markets when current success or failure may affect the probability of future market opportunities. The analysis is conducted in a set up which may be interpreted as two private-value, sealed-bid, second-price sequential auctions. We demonstrate that whether agents price higher or lower than in the corresponding static context depends on the relative magnitudes of the 'winner's option value' and the 'loser's option value' of participating in the later market.

Keywords: AUCTIONS (search for similar items in EconPapers)
JEL-codes: D43 D44 D92 (search for similar items in EconPapers)
Pages: 28 pages
Date: 1998
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Citations: View citations in EconPapers (7)

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