Sequential vs. Single-Round Uniform-Price Auctions

Claudio Mezzetti -- University of North Carolina, Department of Economics, mezzetti@email.unc.edu

Aleksandar Pekeč, The Fuqua School of Business, Duke University

Ilia Tsetlin, INSEAD, Singapore

Abstract

We study sequential and single-round uniform-price auctions with affiliated values. We derive symmetric equilibrium for the auction in which k₁ objects are sold in the first round and k₂ in the second round, with and without revelation of the first-round winning bids. We demonstrate that auctioning objects in sequence generates a lowballing effect that reduces first-round revenue. Thus, revenue is greater in a single-round, uniform auction for k = k₁+k₂ objects than in a sequential uniform auction with no bid announcement. When the first-round winning bids are announced, we also identify two informational effects: a positive effect on second-round price and an ambiguous effect on first-round price. The expected first-round price can be greater or smaller than with no bid announcement, and greater or smaller than the expected price in a single-round uniform auction. As a result, total expected revenue in a sequential uniform auction with winning-bids announcement can be greater or smaller than in a single-round uniform auction.

Journal of Economic Literature Classification Numbers: D44, D82.

Keywords: Multi-Unit Auctions, Sequential Auctions, Uniform-Price Auction, Affiliated Values, Information Revelation.