On the benefits of dynamic bidding when participation is costly

Consider a second-price auction with costly bidding in which bidders with i.i.d. private values have multiple opportunities to bid. If bids are observable, the resulting dynamic-bidding game generates greater expected total welfare than if bids were sealed, for any given reserve price. Making early bids observable allows highvalue bidders to signal their strength and deter others from entering the auction. Nonetheless, as long as the seller can commit to a reserve price, expected revenue is higher when bids are observable than when they are sealed. JEL Codes: D44.