Multi-object auctions: sequential vs. simultaneous sales
Article Abstract:
An investigation of a contradiction between auction theory result and actual practice demonstrates the effect of a sequential auction's bid announcements on the pricing of subsequent items to be auctioned (the theory result) and the resulting practice of potential buyers to underbid to disguise conveyed information (the actual practice). An auction model is developed to analyze these opposing effects. Existing literature on sequential versus simultaneous sales is reviewed, a two-signals model is developed, and equilibrium strategies are discussed. Results indicate that either underbidding or higher prices on the later items auctioned may result from sequential selling; consequently, sellers may prefer either sequential or simultaneous auctioning. The concept of the "winner's curse" may be offered as a possible explanation for the ordering.
Publication Name: Management Science
Subject: Business, general
ISSN: 0025-1909
Year: 1986
User Contributions:
Comment about this article or add new information about this topic:
Bidding in common value auctions: how the commercial construction industry corrects for the winner's curse
Article Abstract:
A study is conducted to investigate why experienced executives from the commercial construction industry suffer a 'winner's curse' in laboratory auction markets while successfully avoiding it in the field. The 'winner's curse' refers to the phenomenon where the low bidder wins an item in an auction but pays for it with below normal or even negative profit. Analysis of the success of construction executives in avoiding the winner's curse in field environments and their susceptibility to the curse in the Dyer et al. (1989) study reveals several significant differences between field and laboratory settings. Industry-specific mechanisms, bidding characteristics and evaluative processes are found to exist in field settings that help contractors escape the winner's curse.
Publication Name: Management Science
Subject: Business, general
ISSN: 0025-1909
Year: 1996
User Contributions:
Comment about this article or add new information about this topic:
Combining buy-in penalties with commissions at auction houses
Article Abstract:
Auction houses can maximize their earnings by exploiting the provisions for buy-in penalties in their contracts with sellers. Such penalties require sellers to pay the auction house a certain fee if their property is not sold. When combined with lower commissions, they induce sellers to lower the reserve amount or the lowest acceptable auction bid which, in turn, attracts more bidders and increases the total expected auction revenue. Since this creates a 'surplus revenue' that can be shared by both seller and auction houses, it is Pareto-dominant over a strategy that charges sellers high commissions and employs no buy-in penalties. It remains Pareto-dominant when the number of bidders are exogenous and is applicable only to risk-neutral sellers and auction houses.
Publication Name: Management Science
Subject: Business, general
ISSN: 0025-1909
Year: 1996
User Contributions:
Comment about this article or add new information about this topic:
- Abstracts: Infinite horizon production planning in time-varying systems with convex production and inventory costs. Optimal capacity expansion over an infinite horizon
- Abstracts: Organizational dysfunctions of decline. The romance of leadership and the evaluation of organizational performance
- Abstracts: Firm asymmetries and sequential R&D: theory and evidence from the mainframe computer industry. An interactive decomposable heuristic for project selection
- Abstracts: A laboratory market examination of the consumer price response to information about producers' costs and profits
- Abstracts: A primal simplex approach to pure processing networks. Unification of linear programming with a rule-based system by the post-model analysis approach