Sequential auctions, price trends, and risk preferences

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalpeer-review

5 Scopus Citations
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Author(s)

Detail(s)

Original languageEnglish
Pages (from-to)319-335
Journal / PublicationJournal of Economic Theory
Volume158
Issue numberPart A
Online published18 May 2015
Publication statusPublished - Jul 2015
Externally publishedYes

Abstract

We analyze sequential auctions in a general environment where bidders are heterogeneous in risk exposures and exhibit non-quasilinear utilities. We derive a pure strategy symmetric equilibrium for the sequential Dutch and Vickrey auctions respectively, with an arbitrary number of identical objects for sale. When bidders are risk averse (preferring), the equilibrium price sequences must be downward (upward) drifting. The "declining price anomaly" is thus evidence of bidder risk aversion in this general environment. These results derive from a key assumption that bidders' marginal utilities are log-supermodular in payment and type.

Research Area(s)

  • Background risk, Declining price, Ex-post efficiency, Log-supermodularity, Risk preference, Sequential auction

Citation Format(s)

Sequential auctions, price trends, and risk preferences. / Hu, Audrey; Zou, Liang.

In: Journal of Economic Theory, Vol. 158, No. Part A, 07.2015, p. 319-335.

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalpeer-review