{"title":"Loss aversion in sequential auctions","authors":"A. Rosato","doi":"10.3982/te4096","DOIUrl":null,"url":null,"abstract":"I analyze sequential auctions with expectations‐based loss‐averse bidders who have independent private values and unit demand. Equilibrium bids are history dependent and subject to a “discouragement effect”: the higher is the winning bid in the current round, the less aggressive are the bids of the remaining bidders in the next round. Moreover, because they experience a loss in each round in which they fail to obtain an object, bidders are willing to pay a premium to win sooner rather than later. This desire to win earlier leads prices to decline in equilibrium. I also show how various disclosure policies regarding the outcome of earlier auctions affect equilibrium bids, and that sequential and simultaneous auctions are neither bidder‐payoff equivalent nor revenue equivalent.","PeriodicalId":46923,"journal":{"name":"Theoretical Economics","volume":null,"pages":null},"PeriodicalIF":1.2000,"publicationDate":"2023-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"1","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Theoretical Economics","FirstCategoryId":"96","ListUrlMain":"https://doi.org/10.3982/te4096","RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q3","JCRName":"ECONOMICS","Score":null,"Total":0}
引用次数: 1
Abstract
I analyze sequential auctions with expectations‐based loss‐averse bidders who have independent private values and unit demand. Equilibrium bids are history dependent and subject to a “discouragement effect”: the higher is the winning bid in the current round, the less aggressive are the bids of the remaining bidders in the next round. Moreover, because they experience a loss in each round in which they fail to obtain an object, bidders are willing to pay a premium to win sooner rather than later. This desire to win earlier leads prices to decline in equilibrium. I also show how various disclosure policies regarding the outcome of earlier auctions affect equilibrium bids, and that sequential and simultaneous auctions are neither bidder‐payoff equivalent nor revenue equivalent.
期刊介绍：
Theoretical Economics publishes leading research in economic theory. It is published by the Econometric Society three times a year, in January, May, and September. All content is freely available. It is included in the Social Sciences Citation Index
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