When Should Sellers Use Auctions?

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.

China's land market auctions: evidence of corruption?

“…Bulow and Klemperer () and Roberts and Sweeting () also compare English auction with an auction with sequential pairwise elimination. Both types differ from the two‐stage auction in China's land market auction, based on whether bidders know their valuations ex ante or observe signals about their valuation, as well as assuming sequential pairwise elimination.…”

Hiding Information in Open Auctions with Jump Bids

“…Fishman (1988) presents a two-bidders independent private value model in which one of the two bidders has an informational advantage: she is able to discover her valuation prior to the start of the auction, while the other bidder cannot. Interestingly, Roberts and Sweeting (2013) show that if potential entrants receive an informative signal prior to the entry decision and if they may be ex ante asymmetric, the jump bidding equilibrium of the sequential sale mechanism may induce higher revenues and efficiency than the simultaneous auction. In this setting, a jump bid has an anti-competitive effect and reduces the seller's revenue.…”

Identification in Auctions With Selective Entry

“…properties for the resulting estimators is challenging, however, so in applications parametric or semiparametric methods may well be preferred. For one example of a fully parametric approach, see Roberts and Sweeting (2010), who estimated a log-normal AS model incorporating rich auction-level unobserved heterogeneity. A natural semiparametric strategy would be to combine nonparametric estimation ofŝ N (z) andF(·|N z) with a parametric copula C θ (·) for the joint CDF F(v s).…”

“…Depending on how precisely signals are related to values, the AS model nests the perfectly selective S model, the random-entry LS model, and a variety of entry structures in between. The AS model has thus become a focal point for researchers seeking to understand the implications of entry and selection in auctions; applications to date include Marmer, Shneyerov, and Xu (2013), who proposed nonparametric tests of the AS, S, and LS entry specifications, and Roberts andSweeting (2010, 2013), who estimated a parametric variant of the AS model using data on California timber auctions. We provide a formal theory of identification to complement this growing empirical literature.…”