Advantage for Sale: Endogenous Asymmetry in Sequential Auctions

Mauricio Bugarin (), Odilon Camara () and Wilfredo Leiva Maldonado ()

No 2025_12, Working Papers, Department of Economics from University of São Paulo (FEA-USP)

Abstract: In some real-world markets where buyers compete to trade with a seller, the winner of the good or service today also gains a contractual advantage in future competitions. We study advantage-for-sale (AFS) mechanisms, where the seller deliberately grants this advantage. We characterize the optimal AFS mechanism and show it strictly benefits the seller when she has limited ability to contract on past outcomes. The seller grants a larger advantage when bidders are fewer or more patient. This advantage — a lower reserve price and a discount on rival bids — intensifies competition for the winner`s status and increases revenue.

Keywords: Sequential auctions; right of first refusal; dynamic mechanism design (search for similar items in EconPapers)
JEL-codes: C73 D44 (search for similar items in EconPapers)
Date: 2025-09-30
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