Abstract
We extend the Coase conjecture to the case of a seller with a single object, who faces n potential buyers and holds a sequence of English auctions until the object is sold. In an independent-private-values environment in which buyers and sellers share the same discount factor, we show that the (perfect Bayesian) equilibrium path of reserve prices obeys a Coasian logic. Moreover, the equilibrium reserve path lies below that for the repeated sealed-bid, second-price auctions studied by McAfee and Vincent (in Games Econ Behav 18:246–276). Nevertheless, the open (English) and sealed-bid formats are shown to be revenue equivalent.
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Our thanks to seminar audiences at the Universities of Auckland and Melbourne and at the First Singapore Economic Theory Workshop for feedback on early drafts of this paper. Special thanks to Suren Basov for helpful discussion of the Revenue Equivalence result. We also wish to acknowledge the two anonymous referees for their careful reading of the paper and for comments which have significantly improved the exposition. We received financial assistance of the Economic Design Network, for which we are most grateful, and Menezes acknowledges the financial support from the ARC (Grants DP 0557885 and 0663768).
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Menezes, F.M., Ryan, M.J. Coasian dynamics in repeated English auctions. Int J Game Theory 38, 349–366 (2009). https://doi.org/10.1007/s00182-009-0164-7
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DOI: https://doi.org/10.1007/s00182-009-0164-7