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Indiana University Bloomington

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1960 Notable

From 1960-2013, we prepared nearly 1,200 men and women
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Journal Articles

Best Foot Forward or Best For Last in a Sequential Auction

2006, Rand (Bell) Journal of Economics

Archishman Chakraborty, Nandini Gupta, Rick Harbaugh

Abstract

Should a seller with private information sell the best or worst goods first? Considering the sequential auction of two stochastically equivalent goods, we find that the seller has an incentive to impress buyers by selling the better good first because the seller’s sequencing strategy endogenously generates correlation in the values of the goods across periods. When this impression effect is strong enough, selling the better good first is the unique pure-strategy equilibrium. By credibly revealing to all buyers the seller’s ranking of the goods, an equilibrium strategy of sequencing the goods reduces buyer information rents and increases expected revenues in accordance with the linkage principle.

Citation

Chakraborty, Archishman, Nandini Gupta, and Rick Harbaugh (2006), "Best Foot Forward or Best For Last in a Sequential Auction," RAND Journal of Economics, Vol. 37, No. 1, Spring, pp. 176–194.

Keywords

Sequential Auctions, Seller information, Seller Sequencing, Declining Price Anomaly, Linkage Principle, Privatization Auctions