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Economic Theory

, Volume 34, Issue 1, pp 47–67 | Cite as

Second chance offers versus sequential auctions: theory and behavior

  • Timothy C. Salmon
  • Bart J. WilsonEmail author
Research Article

Abstract

Second chance offers in online marketplaces involve a seller conducting an auction for a single object and then using information from the auction to offer a losing bidder a take-it-or-leave-it price for another unit. We theoretically and experimentally investigate this practice and compare it to two sequential auctions. We show that the equilibrium bidding strategy in the second chance offer mechanism only exists in mixed strategies, and we observe that this mechanism generates more profit for the auctioneer than two sequential auctions. We also observe virtually no rejections of profitable offers in the ultimatum bargaining stage.

Keywords

Ascending auctions Ultimatum games Mixed strategies Experimental economics 

JEL Classification Numbers

D44 C90 

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Copyright information

© Springer-Verlag 2006

Authors and Affiliations

  1. 1.Department of EconomicsFlorida State UniversityTallahasseeUSA
  2. 2.Interdisciplinary Center for EconomicsGeorge Mason UniversityFairfaxUSA

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