Working Paper: NBER ID: w17624
Authors: James W. Roberts; Andrew Sweeting
Abstract: A bidding process can be organized so that offers are submitted simultaneously or sequentially. In the latter case, potential buyers can condition their behavior on previous entrants' decisions. The relative performance of these mechanisms is investigated when entry is costly and selective, meaning that potential buyers with higher values are more likely to participate. A simple sequential mechanism can give both buyers and sellers significantly higher payoffs than the commonly used simultaneous bid auction. The findings are illustrated with parameters estimated from simultaneous entry USFS timber auctions where our estimates predict that the sequential mechanism would increase revenue and efficiency.
Keywords: Auctions; Bidding Mechanisms; Sequential Mechanisms; Simultaneous Auctions; Entry Costs
JEL Codes: D04; L20
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| sequential bidding mechanism (D44) | higher payoffs for buyers (D43) |
| sequential bidding mechanism (D44) | higher payoffs for sellers (D43) |
| sequential mechanism (C69) | higher expected revenues than simultaneous auction (D44) |
| selective entry (C34) | alters equilibrium of sequential mechanism (D51) |
| sequential mechanism (C69) | enhances efficiency (D61) |
| bidders observing prior bids (D44) | encourages participation from bidders with higher valuations (D44) |
| expected value of the winner in sequential mechanism (D44) | exceeds that in simultaneous auction (D44) |