Simultaneous Vs. Sequential Auctions, Intensity of Competition and Uncertainty

Under what circumstances will an auctioneer be better off selling his inventory sequentially, rather than selling them all in a single auction? If bidders come sequentially, there is an obvious reason to sell items sequentially. However, even when all bidders present at the beginning of the auction, and both the auctioneer and bidders are impatient, we show that a sequential auction can still be more profitable for the auctioneer, depending on the “intensity of competition”, which is characterized by the number of items available relative to the number of bidders. Moreover, a sequential auction without a reserve price can perform better than an auction with one, if the auctioneer cannot commit not to (eventually) sell items below any reserve price announced at the beginning of the auction. A sequential auction can also be better when bidders do not know exactly how many items are available for sale. The auctioneer can then take advantage of this uncertainty by pretending to have low inventory, to stimulate competition among the bidders. This result is then extended to a more general T period setting. Simultaneous vs. Sequential Auctions, Intensity of Competition and Uncertainty