Simultaneous vs. Sequential Auctions,
Intensity of Competition and Uncertainty
Juan Feng1 and Kalyan
Chatterjee2
1Decision
and Information Sciences Department,
Under
what circumstances will an auctioneer be better off selling his inventory
sequentially, rather than selling them all in a single auction? If bidders come
sequentially, there is an obvious reason to sell items sequentially. However,
even when all bidders are present at the beginning of the auction, and both the
auctioneer and bidders are impatient, we show that a sequential auction can
still be more profitable to the auctioneer, depending on the “intensity of
competition”, which is characterized by the number of items available relative
to the number of bidders. Moreover, a
sequential auction without a reserve price can perform better than an auction
with one, if the auctioneer can not commit not to (eventually) sell any items
below any reserve price announced at the beginning of the auction. Another
circumstance where a sequential auction can be better,
is when bidders don’t know exactly how many items available for sale. The
auctioneer can then take advantage of this uncertainty by pretending to be one
with less inventory, to stimulate competition among
the bidders. Finally, we show that in a T
period setting, how the auctioneer can exploit this uncertainty, by pretending
to be an auctioneer with limited inventory for certain periods of time, then
revealing this information with time-dependent probabilities.