Review of Economic Design

, Volume 18, Issue 1, pp 11–35 | Cite as

Ordering sellers in sequential auctions

Original Paper


We examine how buyers’ behaviors, sellers’ profits and the social welfare (the total surplus of all sellers and buyers) vary with the order of sellers in sequential auctions where sellers have different reservation values. First, when reserve prices are exogenously set to be sellers’ reservation values, a social planner would order sellers from low to high based on their reservation values, which yields a uniquely efficient order that maximizes the social welfare. However, an auctioneer charged with maximizing the total profit of all sellers would want to reverse the increasing order in certain situations. Second, when reserve prices can be endogenously selected in addition to the order of sellers, the auctioneer would always want to adopt the increasing order for the optimally chosen reserve prices. Sequential auctions with optimally chosen reserve prices and an increasing order are shown optimal among the class of voluntary and incentive-compatible mechanisms.


Sequential auctions Efficiency Optimal mechanism  Order  Reserve prices 

JEL Classification

D44 D82 


  1. Ashenfelter O (1989) How auctions work for wine and art. J Econ Perspect 3:23–36CrossRefGoogle Scholar
  2. Beggs A, Graddy K (1997) Declining values and the afternoon effect: evidence from art auctions. RAND J Econ 28(3):544–565CrossRefGoogle Scholar
  3. van den Berg G, van Ours J, Pradhan M (2001) The declining price anomaly in dutch rose auctions. Am Econ Rev 91:1055–1062CrossRefGoogle Scholar
  4. Caillaud B, Mezzetti C (2004) Equilibrium reserve prices in sequential ascending auctions. J Econ Theory 117:78–95CrossRefGoogle Scholar
  5. Harris M, Raviv A (1981) Allocation mechanisms and the design of auctions. Econometrica 49:1477–1499CrossRefGoogle Scholar
  6. Mas-Colell A, Whinston MD, Green JR (1995) Microeconomic theory. Oxford University Press, OxfordGoogle Scholar
  7. McAfee P, Vincent D (1997) Sequentially optimal auctions. Games Econ Behav 18:246–276CrossRefGoogle Scholar
  8. Milgrom P, Weber R (1982) A theory of auctions and competitive bidding. Econometrica 50:1089–1122CrossRefGoogle Scholar
  9. Milgrom P (2004) Putting auction theory to work. Cambridge University Press, CambridgeGoogle Scholar
  10. Myerson R (1981) Optimal auction design. Math Oper Res 6:58–63CrossRefGoogle Scholar
  11. Weber R (1983) Multiple-object auctions. In: Engelbrecht-Wiggans R, Shubik M, Stark R (eds) Auctions, bidding, and contracting. UP, New York, pp 165–191Google Scholar

Copyright information

© Springer-Verlag Berlin Heidelberg 2013

Authors and Affiliations

  1. 1.Research Institute of Economics and ManagementSouthwestern University of Finance and EconomicsChengduChina
  2. 2.Department of EconomicsUniversity of WashingtonSeattleUSA
  3. 3.Department of EconomicsStanford UniversityStanfordUSA

Personalised recommendations